TLDR
- Rigetti Computing stock surged 18% on Wednesday, closing at $11.64 following a Craig-Hallum upgrade
- The firm raised its price target from $12 to $14 despite Q1 revenue falling 52% to $1.47 million
- Rigetti secured multiple government contracts from the US and UK, strengthening its position in quantum computing
- The company faces competition from larger players like IBM Quantum and Google Quantum AI
- Despite revenue challenges, Rigetti reported a surprising net profit of $42.6 million in Q1, though this was due to a one-time $62.1 million noncash gain
Rigetti Computing (NASDAQ:RGTI) shares jumped 18% on Wednesday, closing at $11.64 as investors responded positively to a new analyst rating. Investment firm Craig-Hallum upgraded the quantum computing company with a “buy” recommendation and increased its price target from $12 to $14.
The stock’s surge came despite Rigetti’s recent first-quarter earnings report showing a 52% year-over-year revenue decline. The company reported just $1.47 million in revenue compared to $3.05 million in the same period last year.
Operating losses also expanded by 30% to $21.6 million, up from $16.58 million in the previous year. Total operating expenses grew by 22% to $22.07 million.
However, the company reported a surprising net profit of $42.6 million for Q1, compared to a net loss of $20.8 million a year earlier. This profit wasn’t from operations but came from a $62.1 million noncash gain related to the revaluation of warrants and earn-out liabilities.
Without this one-time gain, Rigetti would have only slightly narrowed its net loss to $19.5 million.
Government Contracts Boost Outlook
The positive analyst outlook follows several contract wins that have strengthened Rigetti’s position in the quantum computing sector. The company has secured projects from both US and UK government agencies.
These contracts include participation in DARPA’s Quantum Benchmarking Initiative and receiving an Air Force Office of Scientific Research (AFOSR) award to develop breakthrough chip fabrication technology.
Rigetti also won three Innovate UK Quantum Mission pilot awards to advance superconducting quantum computing. Additionally, the company secured a $5.5 million grant from the U.S. Air Force.
In a market expansion move, Rigetti recently partnered with Taiwan’s Quanta Computer to develop new quantum systems and sold its first Quantum Processing Unit (QPU) to Montana State University, marking its first academic institution sale.
Product Portfolio and Competition
Rigetti offers a full-stack approach to quantum computing. The company develops Quantum Processing Units (QPUs), builds complete systems, and provides a cloud-based platform called Forest for developers to build quantum applications.
Recently, Rigetti launched its Novera QPU, a smaller 9-qubit computer for commercial customers priced at $900,000. The company also released its 84-qubit Ankaa-3 quantum computing system designed for government and research clients.
Future plans include launching a modular system that merges four 9-qubit chips into a 36-qubit system this year, with a goal to introduce a nonmodular 100-qubit system by 2026.
The quantum computing space is highly competitive. Rigetti faces tough competition from larger players including IBM Quantum, which deployed a 1,121-qubit Condor chip in 2023, and Google Quantum AI, which introduced its 105-qubit Willow chip in 2024.
Valuation Concerns
While Rigetti’s stock is currently soaring, its valuation raises questions. With a market cap of $3.32 billion, the company trades at 237 times this year’s projected sales.
Analysts expect Rigetti’s revenue to grow 30% to $14 million in 2025 before jumping 140% to $33.6 million in 2026. Even at those growth rates, the stock would still trade at 99 times its projected 2026 sales.
The Wednesday stock surge occurred on a mixed day for Wall Street indices. The tech-heavy Nasdaq grew 0.72 percent, the S&P 500 rose 0.10 percent, while the Dow Jones declined by 0.21 percent.
Several analysts have noted that the 90-day trade truce between the US and China has continued to boost investor confidence in technology stocks, potentially contributing to Rigetti’s strong performance.
Rigetti’s latest stock surge came after the market fully digested its May 12th earnings report, which initially caused shares to drop 12% in after-hours trading following the release.
The stock’s most recent closing price of $11.64 represents strong recovery and suggests investors are focusing more on the company’s long-term potential in the quantum computing market rather than its current financial challenges.
