An analyst named the "most worthwhile investment" among quantum companies

Buying D-Wave Quantum stock is the most sound choice among quantum computing stocks, according to Anders Bylund, a contributing analyst at The Motley Fool. Unlike its competitors, this company has revenue-generating customers and a strategy based on two technologies at once, he explains.

"D-Wave Quantum is a true rarity," says Anders Bylund, a freelance analyst for The Motley Fool. The company specializes exclusively in quantum computing, and its systems are already being used by customers, he explains.

For example, D-Wave technology helped telecommunications giant AT&T reduce the time it took to complete a complex task from one hour to less than 15 seconds, said the company's CEO, Alan Baratz, during a conference call with analysts following the release of its second-quarter results.

During the reporting period, D-Wave’s backlog increased by 668% year-over-year to $40.7 million. More than half of this portfolio is expected to be recognized as revenue over the next year, according to Bailund.

He also highlights D-Wave’s business expansion. In January, the company announced the acquisition of Quantum Circuits, a developer of quantum computing systems based on superconducting gate models that process information step by step. D-Wave itself uses an alternative approach—quantum annealing—in which a problem is solved as a single unit. Combining these technologies will enable the company to be the first on the market to implement fully error-corrected, scalable quantum computing. By 2032, the company expects to develop a system capable of successfully performing more than one million operations, thereby supporting early-stage applications in quantum chemistry and quantum artificial intelligence.

This year has not been without its ups and downs for D-Wave, Bailund writes. On August 25, the company announced that its chief financial officer, John Markovich, would be retiring effective September 2. This led to a 9.5% drop in the stock price. The company is burning through cash quickly and investing heavily in developing a new business model, so this may not be the best time for personnel changes, the analyst notes.

He also points out that D-Wave has been actively raising capital by issuing additional shares, resulting in a doubling of the number of shares outstanding over the past two years.

They are currently trading at a price-to-sales multiple (the ratio of market capitalization to annual revenue) of 500. Such a valuation assumes that “everything will go as planned” and leaves the company virtually no room for error, Bailund points out.

The analyst believes that, considering all the pros and cons, D-Wave stock is a sound choice among the securities of specialized companies. However, investors who want to invest in quantum technology without taking on significant risks should consider stocks of tech giants such as IBM or Alphabet, he notes.

Since the beginning of the year, D-Wave’s stock price has plummeted by 35%. At the same time, Wall Street generally views the company’s prospects positively: analysts have issued 16 “buy” recommendations, one “neutral” rating, and one “sell” recommendation. The average price target is $35.7, which implies upside potential of 110% relative to the stock’s closing price on August 28.