Mackenzie Tatananni

Quantum Computing has a lot to recover from. The stock slid in March ahead of the company's fourth-quarter report. Competition remains stiff as larger players such as Microsoft and Amazon.com stake their claims in the sector. Shares have lost half their value so far in 2025.

But one analyst sees a buying opportunity, arguing that Quantum has room to grow in a burgeoning industry that has yet to reach its full potential.

Ascendiant Capital Markets analyst Edward Woo reiterated a Buy rating on Quantum stock, and raised his price target to $14 from $8.50 in an April 26 note. Woo's new price target suggests the stock can nearly double.

Shares were up 1.3% to $7.25 on Monday, partially lifted by IBM's announcement that it would invest more than $30 billion into the domestic manufacturing of its mainframe and quantum computers.

When it comes to Quantum, investors should consider the bigger picture, including the company's pursuit of commercial viability, the analyst argued. Woo, for one, expects revenue to increase "significantly" in 2025 and 2026.

Quantum and its peers are start-ups, recording only minimal revenue, and the company's December quarter report showed expenses were rising. Wary investors sold off shares ahead of the report, sending them down 12% on March 20, and adding to a selloff triggered by Nvidia GTC's inaugural Quantum Day.

Quantum reported after the bell on March 20 that total revenue fell 17% to $62,000 in the fourth quarter, while operating expenses surged to $8.9 million from $6.6 million. The loss for the quarter was $51.2 million, far wider than the year-ago loss of $6.8 million.

But Woo sees reasons to be encouraged. The company's recent financial performance is reflective of its "developmental and early commercialization stage," he wrote.

The analyst noted that Quantum recently launched several new products, such as Dirac-3, which was styled as its highest-performance quantum machine to date.

Woo highlighted the company's flagship Qatalyst suite, describing it as "a ready-to-run quantum and classical software for optimization computations for faster, better, and more diverse business decisions."

He also remains bullish on the company's coming foundry in Tempe, Ariz., which could provide a second revenue stream. Specifically, Woo expects the foundry, which is "almost open with lots of orders," to deliver a boost to 2025 revenue.

Management maintains that the foundry remains on schedule and is in the final stage of commissioning. The initiative was overseen by former CEO William McGann, who announced his retirement last week.

Despite his optimism, Woo slashed his 2025 revenue forecast to $700,000, down from a prior $1.5 million. It's worth noting that this is more than twice the $373,000 in revenue Quantum reported in 2024.

Woo said he expects a full-year loss of 26 cents a share, slightly wider than his previous estimate of 21 cents. Still, his estimate is considerably narrower than the loss of 73 cents a share the company reported in 2024.

"By being early in this rapidly growing industry, we believe Quantum is well-positioned to capture and drive a meaningful market share and industry growth," the analyst wrote.

Underpinning his bullish thesis is the belief that quantum computing represents a multibillion-dollar sector in early stages, presenting high rewards for the risks.

There's a genuine need for the technology, Woo argued. The widespread adoption of technologies such as artificial intelligence has exponentially increased the generation of data. In turn, a need has emerged for high-powered computing to process all this information.

"As quantum computing hardware continues to advance, we expect a corresponding growth in demand for quantum software to run on these computers," Woo wrote. Quantum, in his view, is positioned to benefit on this front.

Quantum computing may very well be the way of the future, which is underscored by continued investments from large, established names in tech such as Alphabet's Google unit and Microsoft.

Quantum stock has dropped 56% year to date, and Woo suggests that there's opportunity now. Interest in the quantum-computing industry is growing quickly, he noted.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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April 28, 2025 10:25 ET (14:25 GMT)

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