Is D-Wave Quantum a Buy? Here's What the Data Says.

Investors hope that quantum computing could be the next big investing trend after artificial intelligence, and one of the most talked-about names among quantum computing stocks right now is D-Wave Quantum (NASDAQ: QBTS).

The company recently reported its second quarter results, and D-Wave stock immediately nosedived, even after a 1,120% increase in bookings.

So, is it time to pick up some of the company's shares after the recent decline? The data suggests you should avoid D-Wave stock for now.

Image source: The Motley Fool.

D-Wave shares are beyond expensive, and revenue is negligible

D-Wave's Q2 sales were just $3 million, slightly below sales from the year-ago quarter and missing Wall Street's consensus estimate of over $4 million. The company's loss per share of $0.13 improved from a loss of $0.42 in the year-ago quarter but fell short of the consensus estimate of a loss of $0.09.

While narrowing losses are a positive sign, D-Wave's inconsistent revenue growth is part of the reason why it's difficult to invest in the company right now. Its sales are choppy, often coming in cycles as D-Wave gains a new customer. This makes it hard to gauge the company's growth.

Most importantly, D-Wave's shares are very expensive at a time when the commercial viability of quantum computing is still in question. The stock has a price-to-sales (P/S) ratio of 496, which is beyond expensive and far higher than the average P/S ratio of about 8 for the technology sector. Typically, tech stocks trading at a high premium balance that out with fast-growing revenue. As I just mentioned, D-Wave doesn't have that.

All of the above means that D-Wave is an expensive stock, with uneven revenue, and significant losses. That's not exactly a recipe for success.

Why it's worth keeping an eye on D-Wave

All that said, it's probably worth keeping an eye on where D-Wave is headed. One highlight from the quarter was D-Wave's $35.5 million in bookings, up 1,120% from the year-ago quarter. D-Wave's bookings indicate future revenue potential, though they aren't guaranteed sales.

Still, the large increase shows that D-Wave can attract customers for its quantum computing technology. Those bookings came on the heels of AT&T agreeing to expand its use of D-Wave's tech and potentially deploy it for "complex optimization challenges across its network operations."

It's still the early innings for quantum computing. This means that investors shouldn't be paying a high premium to own D-Wave's stock -- but they should be keeping a close watch on whether the company can turn its bookings into steady and growing revenue in the coming years.

Chris Neiger 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.