D-Wave Quantum wins target raise from Roth

The stock has been heading higher in recent months, but investors can expect a lot more out of D-Wave Quantum (D-Wave Quantum Stock Quote, Charts, News, Analysts, Financials NYSE:QBTS), according to Roth Capital Partners. In a recent report on the company and stock, Roth analyst Suji Desilva boosted his target price from $2 to $5 while keeping a “Buy” rating, saying D-Wave is about to ride a wave of market interest in quantum computing.

Commercial quantum computing company D-Wave announced on July 20 its preliminary second quarter revenue and bookings, reporting Q2 revenue in the range of $1.7-$1.8 million and total second quarter bookings of $2.5 million compared to $1.0 million a year ago. The company said average deal size grew by 136 per cent year-over-year.

The Q2 topline compares to analysts’ consensus estimate for the quarter of $2.3 million, with management saying the shortfall was due primarily to the timing of revenue recognition on some professional services contracts. Management revised its guidance for the full 2023 year, now calling for revenue of $11-$13 million and adjusted EBITDA of less than negative $58 million.

“We believe that enterprise adoption of quantum computing is accelerating, as evidenced by our year-over-year and year-to-date uptick and growth in bookings. We’re seeing an increased appetite for our quantum solutions by companies from all sectors,” said CEO Alan Baratz in a press release.

Commenting on the release, Desilva said he’s encouraged by the company’s lowered EBITDA guidance, where the earlier call was for a loss of $62 million, and he said it likely reflected improving cost controls by D-Wave. The analyst added that the company continues to leverage its $50 million term loan facility by drawing down an incremental $15 million over the second quarter.

“While professional services revenue recognition timeframe will vary from quarter to quarter, we are very encouraged by improving 2Q23 bookings (+146 per cent year-over-year, fifth straight year-over-year growth quarter) and average deal sizes (+136 per cent year-over-year),” Desliva wrote in his July 21 report.

“We believe this growth bodes well for incrementally higher recurring revenue run-rate over the next several quarters. QBTS continued to grow its enterprise customer base this quarter and showed strong traction in planned government quantum initiatives,” he said.

On revenue, Desilva is expecting QBTS to go from $7.2 million in 2022 to $11.0 million in 2023 and to $25.0 million in 2024, while EPS is expected to go from negative $0.35 per share in 2022 to negative $0.53 in 2023 and to negative $0.51 in 2024.

At press time, Desilva’s new $5.00 target represented a projected one-year return of 82 per cent.

“We believe investor interest in the growth opportunity in quantum computing is intensifying and raise our price target from $2.00 to $5.00,” he said.