This Analyst Thinks Rigetti Computing Stock Can Soar 60% From Here
The realm of quantum computing seems to be the next battleground for big-tech companies. With Google (GOOG) introducing its Willow quantum chip in December 2024 and Microsoft (MSFT) coming out with its quantum computing chip in Majorana 1 earlier this month, the battle is expected to be as fierce as the ongoing one in artificial intelligence (AI).
Anticipating a rise in quantum computing stocks in the future, analysts Benchmark have raised their price target on quantum computing pioneer Rigetti (RGTI).
About Rigetti Computing Stock
Founded in 2013 by Chad Rigetti, a former International Business Machines (IBM) researcher, Rigetti Computing is a prominent player in the quantum computing industry, focusing on developing and integrating quantum hardware and software solutions. The company specializes in building quantum computers and the superconducting quantum processors that power them. Its market capitalization currently stands at $1.78 billion.
Over the past year, the RGTI share price has witnessed a quantum leap of 377%.
Following a discussion with Rigetti's CEO and CFO, Benchmark analyst David Williams sounded optimistic about the company's prospects. The analyst raised his price target on shares to $14, implying 60% upside. So, what is making Williams believe that Rigetti is the right bet for the impending quantum computing megatrend? Let's find out.
Exciting Tailwinds
Rigetti Computing's competitive edge is rooted in its proprietary technology, key strategic alliances, and its vertically integrated fabrication facility, which allows the company to design and manufacture its own quantum chips. A defining moment in Rigetti's development was the introduction of the world's first multi-chip quantum processor. The company primarily derives its revenue from selling its quantum processing units (QPUs) and offering cloud-based quantum computing as a service (QCaaS), granting businesses and researchers remote access to its quantum computational capabilities.
The regulatory climate under President Donald Trump could provide a conducive environment for Rigetti's expansion. A reduction in regulatory constraints may serve as a catalyst for innovation within the quantum computing sector, enabling Rigetti and its counterparts to push forward with technological advancements at a more rapid pace.
The company's collaboration with Quantum Machines underscores a targeted approach to overcoming one of quantum computing's primary challenges —qubit calibration. By integrating AI-driven calibration methods, this partnership aims to enhance quantum system efficiency and reliability, helping mitigate a fundamental limitation in the industry. Additionally, Rigetti's alignment with major cloud providers like Amazon (AMZN) and Microsoft (MSFT) could spur wider adoption of its quantum solutions across multiple sectors.
Furthermore, the integration of Rigetti's Novera QPU with Nvidia's (NVDA) Grace Hopper Superchip Servers establishes an advanced platform for applications in quantum artificial intelligence and machine learning. These partnerships not only bolster Rigetti's technological capabilities but also broaden its reach in the competitive quantum computing landscape.
With more than a decade of expertise in the emerging quantum sector, Rigetti continues to drive innovation. A significant milestone was reached when the company launched its 84-qubit Ankaa-3 quantum computer, a considerable enhancement over previous iterations. Featuring vital hardware improvements, Ankaa-3 boosts computational performance, reinforcing Rigetti's position in the market and making it an attractive option for research institutions and commercial enterprises. Notably, the Ankaa-3 system achieved a median two-qubit gate fidelity of 99.5%, a substantial improvement from earlier versions.
Ultimately, Rigetti's commitment to lowering error rates and refining gate fidelity strengthens its position in the quantum computing industry, helping to differentiate its products in an increasingly competitive market.
Financials to Improve
Rigetti Computing has yet to achieve profitability, as its most recent quarterly results reflected a shortfall in both revenue and earnings. The company reported total revenue of $2.4 million, marking a 23.4% year-over-year decline. However, losses showed some improvement, narrowing to $0.08 per share from $0.17 per share in the corresponding period last year.
The company's net cash used in operating activities reached $42.1 million, compared to $38.2 million for the nine months ending Sept. 30. Despite this, Rigetti closed the quarter with a cash balance of $20.3 million, exceeding its short-term debt obligations of $13.4 million. The CEO has underscored that investors should prioritize the company's advancements in research and technology rather than short-term revenue metrics.
However, looking ahead, Rigetti has set an ambitious trajectory for 2025, emphasizing high-fidelity quantum computing. By mid-year, it intends to deploy a cluster of four interconnected 9-qubit chips, aiming for a two-qubit gate fidelity surpassing 99.5%. Later in the year, the company plans to introduce a quantum system exceeding 100 qubits while maintaining a 99.5% fidelity threshold—an essential benchmark for practical quantum applications.
Fidelity remains the cornerstone of quantum computing, as it dictates the accuracy of operations such as gate executions, state preparation, and error correction. Given the inherent vulnerability of quantum systems to noise, decoherence, and environmental disruptions, achieving higher fidelity is crucial for commercial viability. If Rigetti successfully meets these technological milestones, it could solidify its leadership in the quantum computing industry, unlocking substantial commercial prospects and fostering long-term financial growth.
Analyst Opinions on RGTI
Analysts have attributed a rating of 'Strong Buy' for the stock with a mean target price of $14.60, implying 66% upside potential. Its Street-high price target of $17 suggests that shares can more than 90% over the next 12 months.
Out of five analysts covering the stock, four have a 'Strong Buy' rating and one has a 'Moderate Buy' rating.
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