Rosenblatt initiates on quantum-computing firms Rigetti and QCi at 'buy'

Rosenblatt Securities analyst John McPeake has initiated on shares of quantum computing firms Rigetti Computing and Quantum Computing Inc., opening coverage with "buy" ratings. Amid "trepidation on Wall Street," McPeake argues they already have working products that could give them a competitive advantage in the future.

McPeake has initiated coverage of Rigetti Computing and Quantum Computing Inc. shares with a "buy" rating on each, Barron’s reported.

McPeake set a target price of $40 per share for Rigetti, for upside of 62% from the close on Thursday, January 15. On that day, Rigetti shares fell nearly 4% to $24.70 apiece, giving the company a market capitalization of $8.15 billion.

The target price for Quantum Computing shares was set at $22 per share, implying upside of roughly 80% from current levels. On Thursday, Quantum Computing shares declined 2.6% to $12.20 apiece, for a market valuation of $2.7 billion.

Barron’s noted that McPeake already covers competitors of Rigetti and Quantum Computing, including IonQ and D-Wave Quantum. Both stocks also have “buy” ratings from the analyst.

Rigetti, "unlike some others in the industry,” McPeake was quoted as saying, fabricates its own quantum processors in a facility and has a relatively large base of installed quantum computers at government, research, and academic facilities.

The analyst also highlighted Rigetti’s approach to building large-scale quantum systems by linking smaller processors, called “chiplets,” rather than building a processor on a single, integrated chip. This lends itself to error correction, which is seen as a major hurdle to cross before quantum computers can become broadly available, Barron's writes.

In January, Rigetti said it was delaying the release of its new Cepheus-1-108Q quantum system. Instead of launching by the end of 2025, the company now expects general availability by the end of the first quarter of 2026, citing the need for additional time to improve system accuracy, or "fidelity." McPeake pointed out that products from IBM and privately owned IQM have reported comparable fidelity measures, "so Rigetti does indeed need to get their error rates down to be more competitive."

In its most recent quarterly report released in November, Rigetti reported an 18% year-over-year decline in revenue to $1.9 million, along with a 13.5-fold increase in the net loss to $200.9 million. McPeake expects the company to remain loss-making and generate negative cash flow through 2031, Barron’s notes. However, he believes that achieving “quantum advantage” – the point where quantum computers can perform specific tasks much faster than classical machines – around 2030 shoulf benefit not only Rigetti but the entire industry.

“Quantum Computing Inc. (QCi) has legitimate quantum assets across photonics, compute, security, and sensing, as well as burgeoning thin film lithium niobate (TFLN) fabs could supply both their and industry needs for integrated quantum photonics, nonlinear optics and optical waveguides,” McPeake said, according to Seeking Alpha. 

In its most recent quarterly report, for the third quarter, released in November, the company reported revenue of $384,000, nearly 3.8 times higher year over year, though still well below that of larger peers, Barron’s noted.

McPeake emphasized Quantum Computing's announced acquisition of photonic technology developer Luminar Semiconductor, which produces components that are deemed to be "important building blocks on QCi’s technology roadmap" and expected to "accelerate the advancement of compact, fully- integrated quantum systems for commercial deployment," Quantum Computing said in the announcement. The company expects the transaction to add roughly $25 million in revenue and improve its attractiveness as an investment, Barron’s wrote. McPeake reckons these “real products” will lead to “real revenue” in the future.

Over the last 12 months, Rigetti shares have risen nearly 126%. The stock currently carries nine “buy” ratings versus two “hold” ratings from Wall Street analysts, according to MarketWatch data. The average target price of $39.80 per share implies upside of about 60% from current levels.

Quantum Computing shares have gained 5.5% over the same period. Four analysts rate the stock “buy” versus two “hold” recommendations. The average target price of $18 per share implies upside of roughly 47.5% from the most recent close.