Up 2,400%, Should You Buy Rigetti Computing Right Now?

There's no denying that some quantum computing stocks have delivered amazing returns for investors during the past few years. And Rigetti Computing (NASDAQ: RGTI) is a standout even among some of the most impressive gains, with the stock rising more than 2,400% since January 2023.

But as we all know, all that glitters is not gold. There are some very good reasons to avoid Rigetti right now, even as its stock price surges. Here are three of them.

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1. Rigetti has very little sales

One glaring issue with buying Rigetti stock right now is that the company has virtually no sales. Fine, to be fair, it had $1.9 million in revenue in the first quarter. But that was down 18% from the year-ago quarter. Falling sales for a so-called growth stock is a big red flag.

With such low sales, it shouldn't come as a surprise that Rigetti isn't profitable. The company reported a generally accepted accounting principles (GAAP) net loss of $201 million in Q3.

So, when can investors expect Rigetti to turn things around and start generating meaningful revenue? Not until three to five years from now. That estimate is straight from Rigetti Chief Executive Officer Subodh Kulkarni in comments from the company's Q1 2025 earnings call:

Really, the goal should be to get a quantum computer to Narrow Quantum Advantage. And that's really when commercial sales and sales in general start making sense. And we are talking at least three years from now, maybe four to five years from now.

That's a heck of a long time for investors to wait for meaningful revenue to materialize.

2. Its shares are incredibly overpriced

Even if you're a patient investor and you don't mind waiting for potential sales to materialize, it's important to point out that buying Rigetti right now while revenue is barely registering means you're paying an extremely high premium for the stock.

Rigetti's shares have a price-to-sales (P/S) ratio of 824 right now, which is far more expensive than the average tech stocks P/S ratio of just 9. It's not uncommon for tech growth stocks to be expensive, but their high cost almost always comes paired with fast-growing sales. Rigetti doesn't have that, which means investors are overpaying for virtually nothing right now.

3. Quantum computing is a very speculative market

Adding to the above two reasons investors should avoid Rigetti is the fact that quantum computing itself is a very speculative technology and is in no way guaranteed to deliver on its promises -- or in the time frame that companies hope it will.

Alphabet, which has developed its own quantum computing processor and recently launched a new quantum computing algorithm, has made some big strides in this area. But even with these impressive moves, Alphabet's management believes that "useful" quantum computing is still as much as 10 years away.

Until quantum computing companies, and Rigetti specifically, can prove that quantum computing is useful and can actually generate meaningful sales, buying Rigetti right now is essentially just placing a bet on an unproven technology.

That doesn't mean Rigetti isn't doing real work or working toward a viable product, but it does mean investors are overpaying for shares of a company with essentially no sales and a tech product that may or may not be ready for several years from now.

Even if it reaches its own goals, investors have no idea how much demand Rigetti's product will have or how it will measure up against the competition. Talk about speculative.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.