Why D-Wave Quantum Stock Popped Today
Key Points
Wedbush initiated coverage of D-Wave stock with a buy rating today.
The analyst argues unprofitable quantum computing stocks can be valued on their "engineering and physics" successes.
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D-Wave Quantum (NASDAQ: QBTS) stock soared 10.7% through 3:10 p.m. ET Monday after investment bank Wedbush assumed coverage of the stock with an outperform rating and $40 price target.
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Why Wedbush loves quantum computing
Although valued at $6.7 billion in market capitalization, D-Wave is not profitable. It barely has even revenue -- just $12.4 million generated over the past 12 months. And yet, Wedbush argues today in a note covered by TheFly.com that "companies in the quantum computing market are defined by the solving of engineering and physics R&D challenges through successful execution against technology roadmap milestones," rather than by revenue and profit alone.
Over time, they can expect to receive cash from government research grants and will also accumulate commercial customers. Over time... they will "transition... from cash-burning, capital-intensive, venture-style projects into efficient and scalable businesses."
What's next for D-Wave Quantum stock
How much time will this take? Perhaps less than you think -- but also perhaps more.
This year, analysts who follow D-Wave Quantum forecast the company's revenue to more than triple to $42 million. That won't be enough to make a profit; in fact, losses are forecast at $138 million in 2026 -- rising to $176 million in 2027. Over time, these losses should begin to moderate, but looking out as far as any analysts are making forecasts, the consensus is that even in 2030, D-Wave will still be losing money: $85 million.
The good news is that, with $588 million in the bank, D-Wave probably has the cash it needs to survive until at least 2030. The bad news is that by 2031, it will most likely be out of cash... and still not profitable.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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