As our ardent reader, you already know that we have extensively reviewed the performance of several quantum computing (QC) companies for some time now. For the investors of the pure-play QC stocks, the experience has been an emotional rollercoaster, to say the least. In this article, we will review Rigetti Computing, one of the interenst pure-play QC vendors.
Background Information
Found in 2013, Rigetti Computing (or Rigetti) is a California-based quantum integrated circuits development company. Better still, it is a full-stack quantum computing firm. It designs and fabricates quantum chips, incorporates them into controlling architecture, and develops software that allows coders to write algorithms on the chips.
The brainchild of quantum physicist Chad Rigetti, Rigetti Computing emerged from startup incubator Y Combinator in 2014. It focuses on developing a cloud-computing platform, Forest, which helps programmers to write quantum algorithms.
In a nutshell, Rigetti is a global leader in superconducting QC systems and has a hybrid quantum-classical quantum computing-as-a-service (QCaaS) platform that provides access to quantum computers. It believes in using a modular chip architecture in designing and building scalable, fault-tolerant quantum computers.
In well-coordinated efforts to fund its research and keep it running, Rigetti raised $24 million in Series A funding and $40 million in Series B funding. The next project was to test an 8-qubit quantum computer in 2017. Later, the American quantum tech firm unveiled Forest 1.0 through a public beta availability.
It would also develop Fab-1, a rapid prototyping fabrication (“fab”) lab where lab engineers generate experimental designs for 3D-integrated quantum circuits for quantum-based hardware. As quantum technology continuously evolves, the QC firm keeps pace with the nascent technology by scaling its quantum computers. As a result, Rigetti plans to scale its QC systems from 80 qubits to 1000 qubits by 2024. Indeed, that is a meteoric progression. Two years later, the American QC firm will go higher to launch its 4000-qubit QC system.
Business Review
Now you grasp its mission and future plans, let’s look at its financials. Like the financial reports of D-Wave and IonQ, Rigetti’s financial results help us understand the 2022 quantum computing climate. After some delays, the California-based company released its Q4-2022 financial performance to the public domain in March 2023. Reviewing its financial report, Rigetti Computing saw a revenue of $6.1 million in Q4-2022, compared to its $1.8 million in the same quarter of 2021, representing a 238.9% increase.
Unfortunately, the QC firm could not keep its losses down as it recorded a net loss of $22.9 million in the quarter ending 2022 as against $14.1 million in the same quarter under review in 2021. Those figures represent about a 62.4% increase in net losses. For the full year 2022, the total revenue was $13.1 million with a net loss of $71.5 million. In contrast, the company raked in $8.2 million and saw a net loss of $38.2 million in 2021. Its operating expenses stood at $32.0 million in 2022 versus $12.2 million in 2021, representing a 162.3% increase.
It attributed this rise in operating expenses to increased research and development expenditure. Other factors that led to the increased operating expenses include a $5.4 million goodwill impairment charge and increased costs due to its decision to go public.
Furthermore, cash, equivalents, and securities available for sale totaled $142.8 million. As for future plans, Rigetti intends to raise additional funds to finance its projects by late 2024 or early 2025. Even though the team did not provide any estimates for 2023, the report showed that Rigetti believes it will end 2023 with $65 million – $75 million in cash, cash equivalents, and available-for-sale securities.
Dr. Subodh Kulkarni, the Rigetti President and CEO appointed in December 2022, stated that the quantum tech company now pays attention to scaling its qubit fidelity. He also disclosed that the company has an 84-qubit machine called Ankaa-1 that demonstrates substantial improvement in gate fidelity and gas speed compared to its 80-qubit Aspen M3. CEO Kulkarni noted that they intend to make Ankaa-1 available to their select customers this year.
According to the Chief Executive Officer, the team would develop 84-qubit Ankaa-1 (for enhanced design and further improvement on Ankaa-1) and continuously work on it to reach 99% fidelity.
Overall Performance
In October 2021, Rigetti Computing announced its plans to go public through a SPAC merger deal – an initiative that came to fruition in March 2022. The merger became critical as the 10-year-old QC firm preferred to bypass the hurdles of independently going public on the stock exchange.
The QC trailblazer – which debuted on NASDAQ Capital Market under the ticker symbol “RGTI” – joined forces with Supernova Partners Acquisition Company II Ltd. in a deal valued at about $1.5 billion. Facts culled from the press statement indicate that the California-based quantum tech firm snagged $261.75 million from the strategic business move. It would expend the largesse on developing its quantum processors, expanding its operations, and for general corporate purposes. Because some investors pulled out of the SPAC deal along the line, the QC firm could not net the expected $458 million from it.
At the event, the founder and the-then CEO, Chad Rigetti, noted that the epoch-making business move would bring the company closer to actualizing its goals of achieving quantum advantage. Recall that its common stock started at $9.75 and closed at $9.43 per share.
When Rigetti debuted on the stock market, it was a day of joy for many prospective QC investors who were bullish on the emerging technology’s prospects. Years later, how has Rigetti’s stock performed? Obviously, your guess is as good as ours – it has been a rutted journey for RGTI. In retrospect, Rigetti’s woes started from the first day it debuted on NASDAQ and has maintained a downward trajectory ever since. In short, one crucial highlight was the news that the founder and the-then CEO, Chad Rigetti, was stepping aside.
Afterward, the company’s stocks lost about 30% in November 2022, representing a new 52-week low. The American physicist and computer scientist would eventually leave the company on December 15th, 2022. In February 2023, there were media reports that NASDAQ could delist RGTI from its market by July 24th if the stock does not stay above $1 for 10 days.
At the time, the stock was trading at $1.17. To add insult to injury, the company announced the same month that it was letting go 28% of its staffers to focus on delivering and improving a new machine in the future. The decision to lay off these employees – coupled with the decision to change its CFO and CTO and the departure of the founder – left many investors worried sick about the future of the QC firm. At the time of writing, the stock has been trading less than $1 to exchange at $0.44 per share, representing a 95% slump from its initial listing price. In addition, its market cap is $63.43 million.
3 Factors that Will Improve Rigetti
Rigetti has joined the growing list of pure-play quantum computing companies that used the SPAC merger to go public. Unfortunately, they are all having a bumpy ride at the moment. Earlier, we reviewed D-Wave’s shares which have dropped over 85% in value since it went public, and IonQ’s stock down by 60% from its debut date. As a prospective QC investor, you will probably wonder if there’s light at the end of the QC tunnel since those stocks are not having a swell time. For what it’s worth, we are bullish on the future of these stocks, and we firmly believe that Rigetti will experience some positive turnaround in the coming years for the following reasons:
1. Being at the Forefront of Innovation
You can categorically say that RGTI has been unimpressive for several months, but you cannot accuse Rigetti of lagging behind its rivals in the race-to-market competition. As the first publicly traded full-stack quantum computing firm, Rigetti appears to be getting its quantum-scaling strategy right as the California-based company keeps increasing the capacity of its quantum processors. For instance, it plans to release 84-qubit Ankaa-1 this year and quadruple the size of qubits in Lyra, a 336-qubit computing machine it plans to develop once the team makes Ankaa-1 readily available. In fact, the company hopes to achieve quantum advantage once it builds Lyra, and scale to 4000 qubits by 2027.
2. Making all the Moves to reach its Goals
Week in, week out, Rigetti closes new deals with critical industry players to help the QC firm actualize its goals. For instance, Rigetti has entered into a new deal with AI chip giant Nvidia to expedite the interoperability between classical computing and quantum technology. Likewise, it reached an agreement with Microsoft’s Azure cloud to grant its QC machines access to Microsoft’s cloud computing services. In addition, Bluefors, the world’s leading manufacturer of an ultra-low temperature-dilution-refrigerator-measurement system, is building new refrigerators to accommodate Rigetti’s over 4000-qubit QC systems. All these agreements and many others are geared toward strengthening its research and development (R&D) efforts and edging it toward reaching its goals.
3. A Key player in a new Industry with Huge Untapped Potential
Indeed, Rigetti is a pioneer in a relatively new industry with many daunting obstacles. Despite that, the American QC company is making smart business choices and investing money in the right places to stay profitable and keep its losses minimal. Thanks to Rigetti’s powerful team, its financials are not doing so badly, considering that it operates in an infant quantum tech space. Furthermore, despite sailing in uncharted waters, Rigetti has been able to garner about 38.74% institutional ownership. It is worth noting that the percentage of ownership is not fixed as investors sell and buy shares every day.
Whichever is the case, as more institutional investors consider Rigetti, they will drive interest in the stock, boost share price value, and help stabilize and grow the stock. Simply put, they will attract more investors as the Rigetti team learns new ways to maneuver its difficult terrain and launch scalable, user-centric products, and begins paying its shareholders too-good-to-be-true dividends. As more investors learn about the QC industry and invest in it, QC stocks’ liquidity/bookings will get better.
Analyzing Rigetti
Three Wall Street analysts offering a 12-month price target for Rigetti Computing stock shared their expert advice. They opined that the highest Rigetti stock price target is $2.17, with the highest forecast at $4.00 and the lowest stock price prediction at $1.00. By and large, Wall Street analysts predict that Rigetti’s share price could hit $2.17 by March 2024 with a potential upside of 394.75% from its current $0.44 stock price.
Back to the three analysts, one analyst (33.33%) recommends it as a Strong Buy, the second analyst (33.33%) recommends it as a Buy, and the third analyst (33.33%) says it is a Hold. None (0%) says it is a Sell or Strong Sell.
Pros
- Rigetti will grow by 29.96% per annum
- It has sufficient cash for at least one year
- Does not pay dividends at the moment
- It has not recorded any recent concerning events
- No significant insider sales of shares over the past three months
- Its revenue grew by 46.5% over the past year
- Has a meaningful level of revenue
- More short-term assets than long-term liabilities on its balance sheet
- It has no negative shareholder equity
Cons
- Earnings will decline by 3.2% per annum for the next three years
- The share price has remained relatively volatile over the past three months
- It is not profitable at the moment and may not be profitable over the next three years
Going by the risk analysis above, the best bet is to buy and hold RGTI shares. So, if you do that, you won’t regret buying Rigetti shares because it is currently experiencing a bear. Besides, a 394.75% upside is a plus because a $2.17 price increase within one year is a mouthwatering profit for you. In spite of that, we always encourage quantum computing investors to make it a long-term investment because the industry is new and holds huge untapped potential.