To The Moon

$Quantum Computing Inc.(QUBT)$

Quantum Computing's share price surged over 2000% in 2024, delivering extraordinary returns for shareholders. If you owned this stock last year, congratulations on those explosive gains! However, the big question is: should you buy Quantum Computing stock in 2025, or has the opportunity already passed? In this article, I'll address that question by analyzing the company's financial metrics, evaluating its valuation, and assessing its balance sheet to determine whether this stock is a buy, hold, or sell as we head into 2025. Let’s dive in.

Quantum Computing, trading under the ticker symbol QUBT, saw most of its gains materialize late in the year. This trend was mirrored by other quantum computing stocks like Rigetti Computing and IonQ, which also experienced significant jumps in the latter part of the year. The surge was largely fueled by Alphabet's groundbreaking advancement in quantum computing, which reignited investor enthusiasm for the sector. Interestingly, while Alphabet's market cap only grew by a few percentage points on the news, the smaller quantum computing firms saw far more dramatic percentage increases, highlighting the disparity in their market sizes.

For example, Alphabet’s gains translated into a $50 billion valuation increase, whereas the smaller quantum firms achieved 1,000%+ returns, amounting to a few hundred million in added market cap. This reflects the outsized impact of breakthroughs on smaller-cap companies relative to giants like Alphabet.

Fundamentals Analysis

In terms of fundamentals, Quantum Computing is still in its nascent stage, generating just $386,000 in revenue over the past 12 months. This figure is modest, particularly when compared to its cash flow from operations, which was negative $7 million during the same period. The company remains focused on research and development, which is typical for firms in the early stages of technology innovation.

Looking at the balance sheet, Quantum Computing reported $3 million in cash and $6.5 million in long-term debt, making it more indebted than its peers such as Rigetti and IonQ. With a monthly cash burn of approximately $1 million, the company only has a few months of runway left. However, recent capital raises—made possible by the stock's massive price increase—likely improved the balance sheet significantly. As the company announces its next earnings report, these updated figures should provide a clearer picture of its financial health.

This dynamic is akin to a business owner capitalizing on a significant valuation increase by selling a portion of their business at a premium. Quantum Computing has leveraged its stock surge to raise capital, which should bolster its position as it continues developing its groundbreaking technologies.

Market Sentiment

Quantum computing companies like Quantum Computing have seized the opportunity presented by the surge of interest in the industry, raising millions of dollars while market enthusiasm is high. This capital injection provides these companies with the runway needed to continue their research and development efforts. With highly skilled teams in place, this funding allows them to push forward in developing technologies and innovations that could eventually transition from theoretical research into practical, commercial applications.

The real breakthrough for the quantum computing industry will occur when these technologies can be widely adopted by enterprises to enhance their operations—whether by boosting sales or reducing costs. Although the industry is not at that stage yet, increased funding improves the likelihood of achieving the breakthroughs necessary to unlock large-scale commercial potential. When that happens, these companies could see substantial revenues, potentially scaling into hundreds of millions or even billions, alongside long-term profitability and significant shareholder returns.

Guidance

However, this transformation is still a long way off. Analysts project that Quantum Computing will report a loss of $0.25 per share in 2024 and $0.21 per share in 2025. Losses are expected to persist for years, potentially until 2030 or beyond, as the industry remains focused on R&D rather than generating revenue and profits. This makes it a space primarily for patient investors or those speculating on price increases driven by momentum and market enthusiasm rather than fundamentals.

Valuation

Following its massive 2,000% share price surge in 2024, Quantum Computing is now trading at a forward price-to-sales ratio of an eye-watering 1,458. This extreme valuation reflects soaring investor enthusiasm despite the company's minimal revenue growth. Given these factors, is Quantum Computing a buy for 2025?

Conclusion

I rate it as a sell. The current valuation appears excessively high, and the optimism surrounding the stock seems overblown. Investors would likely benefit from waiting for either a significant price correction or meaningful revenue growth before considering a purchase in 2025.

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