Here’s what RBC thinks about Xanadu Quantum Technologies

RBC Dominion Securities analyst Paul Treiber says Xanadu Quantum Technologies (Xanadu Quantum Technologies Stock Quote, Chart, News, Analysts, Financials TSX:XNDU) gives investors exposure to quantum computing and photonics.

In a report released September 29, Treiber initiated coverage of Xanadu with an “Outperform” rating and $16.00 target.

Xanadu, based in Toronto, went public in March through a merger with Nasdaq-listed SPAC Crane Harbor Acquisition Corp.

“While meaningful commercialization remains several years away, we believe the shares of Xanadu offer compelling long-term capital appreciation potential as the company progresses toward key technical and funding milestones,” Treiber said.

He said Xanadu is the only publicly traded pure-play company developing a photonics-based quantum computer.

Treiber said photonics offers several advantages, including scalable networking, use of existing silicon manufacturing and room-temperature operations.

The company is focused on scaling and performance improvements ahead of a planned quantum data centre in 2029 or 2030.

Treiber said quantum computing could eventually transform drug discovery, materials design, portfolio optimization and cryptography.

He sees multiple paths to monetization, including quantum computing as a service, quantum hardware sales, PennyLane software sales, and photonic devices or intellectual property licensing.

While Xanadu and most quantum peers have limited near-term revenue, Treiber said the industry generally expects quantum monetization to ramp in 2030.

On his calendar 2030 estimates, Xanadu trades at 2.6 times EV/sales, below peers at 8.2 times.

Treiber said potential near-term catalysts include updates on error correction progress, partnerships and government funding.

“While multiple years remain before commercialization, Xanadu has achieved key development milestones to date and has a path towards a fault-tolerant quantum data center,” Treiber said.

The analyst said the stock could rally as Xanadu reaches more milestones and visibility improves toward monetization.

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