Rigetti Computing, Inc., a quantum computing company, has recently faced challenges as analysts cut their revenue estimates for the year. The latest consensus from five analysts suggests revenues of $13 million in 2024, a 4.9% improvement compared to the last 12 months but lower than the previously forecasted $15 million. Analysts have also reduced their price target by 12% to $2.75, indicating concerns about the company’s valuation.
Rigetti’s expected revenue growth rate of 10% annually until the end of 2024 is significantly lower than the historical 20% annual growth over the last three years and lags behind the industry average of 18%. Despite these downgrades, the market has responded positively, with Rigetti’s stock price rising 14% in the past week to $0.90. However, the consensus among analysts suggests that the company’s revenue will underperform broader market expectations, which may lead to increased caution among investors.
In a recent transaction, a Rigetti Computing director sold 20,000 shares of the company’s common stock for a total of $16,400. The sale was executed in accordance with a Rule 10b5-1 trading plan, which allows insiders to set up predetermined schedules for buying or selling shares when they do not possess material non-public information. While such transactions can provide insights into an insider’s perspective on the company’s valuation or future prospects, they can be motivated by various factors and do not necessarily indicate a lack of confidence.
Rigetti Computing has reported advances in the development of its 84-qubit Ankaa-3 system, which it plans to launch by the end of 2024.
Analysts cut revenue projections
The company aims for this system to achieve over 99 percent fidelity in 2-qubit gates.
Despite a slight decrease in revenue and gross margins compared to the same period last year, Rigetti has maintained a robust cash position, raising $27.8 million through its ATM program and resulting in a cash and investments position of $100.5 million. Investors are evaluating Rigetti’s financial stability and market performance. The company holds more cash than debt, indicating financial stability, although it is quickly burning through cash.
Rigetti’s market capitalization is $151.12 million, and its Price to Earnings (P/E) Ratio stands at -1.74, reflecting its current lack of profitability. Analysts do not expect the company to turn profitable this year, and the stock has faced significant volatility, with a 1-Month Price Total Return of -26.83% and a 1-Year Price Total Return of -65.34%. Wall Street analysts’ recommendations can influence investors’ decisions, but their reliability and effectiveness in guiding investors to choose stocks with the most potential for price appreciation have been questioned.
Studies suggest that brokerage firms often have a strong positive bias in rating stocks they cover, with their interests not always aligned with retail investors. The Zacks Rank, a proprietary stock rating tool, classifies stocks into five groups based on earnings estimate revisions. For Rigetti Computing, the Zacks Consensus Estimate for the current year has declined 30.8% over the past month to -$0.34, resulting in a Zacks Rank #4 (Sell).
This suggests that despite the Buy-equivalent average brokerage recommendation, investors should approach Rigetti Computing with caution.
