D-Wave Quantum: Buy QBTS Stock Ahead of Its Upcoming Earnings?
For event-driven traders, this historical pattern can be a useful guide. There are two primary strategies to consider:
As is typical for early-stage quantum technology companies, D-Wave is not yet profitable and continues to burn cash. However, its Q2 results are expected to show improvement. Analysts project revenues of approximately $2.54 million and a net loss of $0.05 per share, which would be a notable improvement from the prior-year quarter's revenue of $2.18 million and a net loss of $0.11 per share.
From a fundamental standpoint, D-Wave has a current market capitalization of $5.2 billion. Over the last twelve months, the company generated $21 million in revenue but reported significant operational losses of $71 million and a net loss of $132 million.That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
See earnings reaction history of all stocks
D-Wave Quantum's Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
Additional data for observed 5-Day (5D) and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves "long" for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on a 5-year and a 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
Consider The Risks As Well
While D-Wave's historical data suggests a possible positive reaction to its earnings report, investors should be aware of the significant risks involved.
The company has a high cash burn rate and a very small revenue base, which is typical for a business in a nascent industry. Quantum technology is still years away from widespread commercial use, making its future revenue streams uncertain.
Additionally, QBTS stock is highly volatile. During the 2022 market correction, the stock plummeted 97% from its peak, a stark contrast to the S&P 500's 25% decline. It took until May of this year for the stock to recover to its previous highs. This history of dramatic swings highlights the considerable risk associated with trading or investing in D-Wave. See – Buy or Sell QBTS stock – for more details.
In contrast, you can look at the Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like D-Wave Quantum, consider the High Quality portfolio, which has outperformed the S&P and clocked >91% returns since inception.
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