Rigetti shares have more than doubled since its Q2 earnings report in August.
The stock is being driven more on sentiment and less on actual financial results.
Updates on Rigetti’s progress preparing its quantum computing technology for commercialization will be more important than how much revenue it reports.
The past year has seen growing investor enthusiasm for the long-term prospects of leading quantum computing companies. Rigetti Computing (NASDAQ: RGTI) is one of the more popular stocks gaining investor attention. The company’s shares have more than doubled this year, but there is an upcoming earnings report on Nov. 11 that could cause volatility in the near-term trading price.
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Quantum computing promises a huge opportunity for leading companies in the industry. Rigetti and other leaders are still in the early innings of this opportunity. This means there is little revenue to support Rigetti’s high valuation. The stock is being driven not by revenue growth but by progress in perfecting its quantum computing systems.
Rigetti’s share price has rocketed 182% since its second-quarter earnings report in August. This didn’t have anything to do with revenue, which fell 41% year over year to $1.8 million. It had more to do with progress in things like reducing computational error rates with its quantum computing systems.
During the Q2 earnings call, management noted a significant performance improvement with its multi-chip quantum computer, Cepheus-1-36Q, which cut error rates in half over the previous Ankaa-3 system. Achieving greater computational accuracy is one of the great challenges in quantum computing, as the qubits that power these machines are extremely sensitive to temperature changes, vibrations, and noise.
Rigetti’s Q2 earnings report showed it is making progress in solving this challenge, which boosted the stock. Since the stock is moving more on sentiment than financial results right now, it’s impossible to know how it will respond to Q3 earnings after Nov. 11. With the significant rise in the share price over the last three months, waiting until after the report may give investors a chance to buy shares at a discount if there is a post-earnings sell-off.
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John Ballard 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.
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