Rigetti Computing Stock Review: Quantum Computing Potential

Today we will be reviewing another hot stock in the quantum computing sector, Rigetti Computing. Rigetti Computing, Inc. (NASDAQ: RGTI) is a leading company in the quantum computing industry, specialising in the development of integrated quantum-classical computing systems. Founded in 2013 by Chad Rigetti, the company is headquartered in Berkeley, California, and has established itself as a pioneer in providing cloud-based quantum computing services, so we could say it is a real play in the quantum computing industry, a technology believed to be the next big thing after the recent boom on AI stocks. So now it is time to find out more about this stock!

Business Model and Offerings

Rigetti’s core business is around delivering full-stack quantum computing solutions. As said, their primary offering, the Quantum Cloud Services (QCS) platform, enables developers to build and deploy quantum algorithms using Rigetti’s quantum processors. By integrating quantum computing with classical computing infrastructure, Rigetti aims to make quantum technology accessible for practical applications across various industries (diversity is always interesting), including finance, healthcare, and logistics.

Financial Performance

Digging on the finances, as of December 25, 2024, Rigetti Computing’s market capitalization stands at approximately $3 billion, so we could say at that valuation that it is not a penny stock anymore, sitting more in the category between small and medium cap. About earnings, in the third quarter of 2024, the company reported revenue of $11.89 million, reflecting that its ongoing efforts to make revenue from quantum computing technology is still far away from their valuation. Despite this revenue generation, Rigetti reported a net loss of $75.11 million over the last four quarters, which is common for companies investing heavily in emerging technologies, although is something to have a look on if revenue doesn’t improve.

Analyst Perspectives and Stock Performance

Within the last two months the stock price for Rigetti Computing had a big uptrend potentially due to the interest from investors in finding the next gem in the next big thing after AI so Rigetti Computing has attracted attention from financial analysts who have provided various price targets and ratings for the company’s stock. Currently there are five analysts that have provided a price target for Rigetti Computing and the consensus among them is a “Strong Buy” rating, with an average 12-month price target of $4.80. However, the price targets range from a low of $2.00 to a high of $12.00, indicating quite differing levels of optimism about the company’s future performance.

Compared to the most recent price at which it closed before the Christmas day, Rigetti’s stock price was at $11.35, so closer towards the higher price target thanks to the recent run. As discussed this surge aligns with a broader trend in the quantum computing sector, where companies like Quantum Computing Inc (Quantum Computing Inc Stock Analysis), D-Wave Quantum (D-Wave Quantum Stock Analysis) and IonQ (IonQ Stock Analysis) have also experienced substantial stock price appreciation.

Recent Earnings Report and Upcoming Earnings Date

Although we have briefly mentioned recent earnings, going more in depth on its third-quarter earnings report released on November 12, 2024, Rigetti Computing reported an earnings per share (EPS) of -$0.08, which was in line with the consensus estimate. The company’s revenue for the quarter was $11.89 million. And as discussed, despite the net loss, Rigetti continues to invest in research and development to advance its quantum computing capabilities which hopefully (unless for us as investors!) brings a lot larger revenues in the future.

Looking ahead, Rigetti Computing is scheduled to release its next earnings report on March 13, 2025. The analysts expect the company to report an EPS of -$0.08 for this upcoming report, which although it is not improving by quarter, it will be indicating a year-over-year improvement of approximately 11% if match the estimates.

Significant Recent Deals and Partnerships

We have gone through their earnings, but which are the clients and the most recent deals for Rigetti Computing. Well, Rigetti Computing has been actively engaging in strategic partnerships and securing significant contracts to advance its technology and expand its market presence, as we have done in other stocks review, we can’t go through all the deals so we will focus on only highlighting the most notable recent deals:

• 5-year contract with Air Force Research Lab (AFRL): In September 2023, Rigetti was awarded a five-year Indefinite Delivery Indefinite Quantity (IDIQ) contract with the AFRL. This agreement enables AFRL to utilize Rigetti’s superconducting qubit fabrication capabilities for quantum networking hardware research and development.
• Novera™ QPU Partner Program: Launched in April 2024, this program aims to foster on-premises quantum computing by establishing an ecosystem of partners across various domains, including cryogenics, control systems, software, and integration services. Founding members include Bluefors, Quantum Machines, Zurich Instruments, Q-CTRL, and others.
• DARPA IMPAQT Contract: In October 2023, Rigetti was selected by the Defense Advanced Research Projects Agency (DARPA) to advance quantum algorithms for solving combinatorial optimization problems as part of the Imagining Practical Applications for a Quantum Tomorrow (IMPAQT) program.
• Partnership with Bluefors: Rigetti has entered into a collaboration with Bluefors, a leading provider of cryogenic systems, to develop next-generation cryogenic platforms expected to be used for Rigetti’s anticipated 336-qubit, 1,000+ qubit, and 4,000+ qubit quantum processing units.
• Funding Initiatives: Although this is not a deal, in March 2024, Rigetti announced a $100 million at-the-market equity offering to support working capital, capital expenditures, and the advancement of their superconducting quantum computing technology.

Market Position and Future Outlook

Rigetti Computing’s approach to quantum computing involves developing scalable quantum processors and integrating them with classical computing systems. This hybrid approach is designed to address complex computational problems more efficiently than traditional methods. The company’s focus is on software mainly by providing cloud-based quantum computing services positions it to a wide range of industries seeking to leverage quantum technology for practical applications.

As a reminder, the quantum computing market is still in its early stages, with significant growth potential anticipated in the coming 5-10 years. Rigetti’s ongoing advancements and strategic partnerships position it favourably to capitalise on this growth. However, as we discussed in similar stock reviews for D-Wave Quantum, Quantum Computing Inc or IonQ, the company faces competition from established technology giants like IBM and Google, which are also investing heavily in quantum computing research and development.

Our Investment Considerations for Rigetti Computing

Investing in Rigetti Computing presents both opportunities and risks. The company’s innovative technology and early entry into the quantum computing market offer significant growth potential in the following 5-10 years. However, the speculative nature of the sector at the moment, coupled with the company’s current lack of profitability, suggests that potential investors should approach with caution.

Analysts’ price targets indicate a potential downside from the current stock price, reflecting the uncertainties inherent in emerging technologies although those are often reviewed after earnings releases. Prospective investors should conduct thorough due diligence, considering both the promising advancements in quantum computing and the challenges associated with bringing such technologies to market in small companies like this.