D-Wave’s Quantum Leap: Brilliant Bet of Bubble Waiting to Barst?

D-Wave shares have risen 1,600% in a year …
And it still doesn’t earn money.

But Wall Street? They call it a strong buy with a whopping 83% advantage.

D-Wave has just raised $ 400 million in two weeks.
It has a quantum computer with 4,400 quubits ready at the moment.

But the company is still bleeding in cash $ 43 million last quarter and acts with a turnover of 600x.

So what drives this? Hype? Heap? Or is this the AI moment of Quantum Computing … only 10 years early?

I will tell you what I am looking at and what should happen before I call this a strong buy.

Let’s go in.

The quantum overview of D-Wave

D-Wave Quantum is a pioneer in Quantum Computing that specializes in the development of gate model computers and glowing systems that, unlike its competitors, are ready for use.

The company has just launched its headline product, benefit 2 quantum computer, which is so far the most advanced system. It would enable his partners, such as Los Alamos Lab and Julich Supercomputing Center, to achieve greater performance and discoveries through its powerful computer equipment.

Stock performance

D-Wave Stock is currently $ 16.38 and has traded between $ 0.75 and $ 20.56. That is quite the ride over the past year, although it seems that the shares act to the top of that reach.

The stock has a strong buy -rating -consensus of 9 Wall Street analysts, a sentiment that seems to be reinforcing recently. The stock price has a high target of $ 30, which suggests no less than 83% in the share in the coming year.

In terms of performance, The share has risen from 95% so far and almost 1600% in the past year – that is absolutely incredible. So, why is D-Wave precisely shooting up?

Why it is in the spotlight

D-Wave ended up on the radar of many investors after a successful completion of a $ 400 million on the market at the end of June. The offer lasted two weeks and was completed at an average price of $ 15.18 per share, which contributed to the $ 150 million increase in January. Yes, there were dilution problems, but the event brought the total cash reserves from D-Wave to around $ 815 million.

So with all that money, let’s see how they do it.

Financial

According to the financial in the first quarter of the company, sales increased 508% to $ 15 million. However, it is still unprofitable because losses reached $ 5.4 million. I think a silver lining is that the net loss was reduced on an annual basis 68.7%, which is excellent considering the extra income.

That said, does not mean that it will be profitable in the following quarter, which could cause fear, uncertainty or a sale.

Let’s talk about cash now. Cash is right? At D-Wave, the company continues to run thanks to stock financing, which rose 322.9% from the same quarter last year. Also comparable to the previous year, the company still burns cash, with an operational cash flow with a loss of $ 43 million.

If this trend continues in the coming quarters or years, the company may have to fold … but we are not there yet. There are still many catalysts.

D-Wave has been set to report the results of the second quarter. As an investor I am looking for improvement in both the upper and bottom lines.

But can they do it?

Growth catalysts

Well, let’s look.

The quantum computing market is set for growth in the coming years. Based on the survey, 53% plan to use Quantum Computing as soon as they are able.

And with that the most advanced product from D-Wave, the benefit2-quantum computer, could experience a huge question as soon as the shift to Kwantum Computing occurs. Advantage2 owns more than 4,400 quubits and 20-way Qubit-Connectivity. It is positioned as a commercial, energy -efficient system for solving complex calculation problems in areas such as optimization, AI and material simulation. The most important thing is that the applications vary from drug discovery and material research to national defense and network optimization.

But all this is not without the risks …

Risks and red flags

I understand that D-Wave now looks like a purchase, but there are a few things you might have missed.

The first problem is dilution. While the turnover of D-Wave shot up on the market offering, it also meant that the total number of upcoming upcoming shares increased, reducing the ownership percentage of the existing shareholders, which is in principle dilution.

The company also burns money. Despite enormous revenue growth, D-Wave has still not achieved any profitability. But let’s give it the benefit of the doubt, and it can be positive next quarter – but what if that is not? How long can investors wait for the company to make a profit?

Valuation breakdown

Although it is normal for companies at an early stage to work with a loss, it is worth comparing how D-Wave performs against his colleagues.

Direct comparison shows us that none of these quantum computing players is currently profitable. Among these companies, D-Wave has the worst return-on-equity, which can be traced to the continuous dilution and operational losses.

Moreover, D-Wave shares acts almost 600 times its turnover. This suggests that the share can be overvalued compared to its sale, especially if it does not translate its technology into sustainable, reliable income flows.

Who should buy this?

D-Wave is moving forward in an industry that is still on the ground floor. I think Quantum Computing is AI in 2015 … And I am not sure if we will see something meaningful in Quantum for at least 5, 7 or 10 years.

If you have reserved a little risk capital for emerging technology such as Quantum Computing, a company like D-Wave might be worth considering. But don’t forget that these are long -term games that run full risk and can go to zero. They can also make you a millionaire.