At face value, quantum computing specialist Rigetti (NASDAQ:RGTI) represents one of the most exciting tech prospects in the market. In the past half-year period, RGTI stock gained more than 919% of equity value, a simply remarkable performance. However, the industry itself is still just trying to establish itself. With so much upside baked in, betting heavily on RGTI at this juncture could be risky.
To be fair, it’s difficult to ignore the hype. No questions exist that quantum computing could one day revolutionize the broader digital ecosystem. Early research and test cases have revealed that these innovative machines can perform tasks that would take classical supercomputers eons to accomplish. Combined with the power and productivity of artificial intelligence, there’s no telling where quantum can take us.
At the same time, RGTI stock requires a reality check. Quantum computing is simply not yet commercially viable at scale. Right now, most businesses and researchers still rely on classical computing due to quantum systems being prone to errors, decoherence and scalability issues.
As such, projections for the industry are imprecise and vary wildly from source to source. For example, Grand View Research states that the global quantum computing industry may generate revenue of $4.24 billion by 2030, which is a rather modest figure. On the other end, Quantum Insider believes the valuation could be up to $1 trillion by 2035.
For its part, Rigetti offers an interesting business model, selling access to its quantum hardware through cloud-based services. Still, making quantum practical and scalable will be a challenge as the industry itself struggles with these goals.
Before anyone decides to short RGTI stock, traders should keep in mind that the equity has suffered three consecutive down weeks. That’s quite rare, occurring only 15 times since RGTI’s public market debut. What’s more, a streak analysis reveals that 80% of the time, the subsequent week (that is, this coming week) sees a reversal.
Therefore, if you want a nuanced (albeit speculative) wager, you may want to consider a short-term swing trade. Under the positive scenario, the median return clocks in at 5.26%. Based off Friday’s close of $8.46, RGTI stock could reach $8.90 by the end of this week.
Still, it might not be particularly prudent to continue wagering on RGTI stock beyond this week, depending on how circumstances shake out. Mainly, that’s because RGTI suffers from a downward bias. A position entered at the beginning of the week only has a less-than-43% chance of rising by the end of it. Over an eight-week period, this probability falls to 37.63%.
Most worryingly for investors, RGTI stock commands an excessively rich premium. Right now, shares trade hands at 116X trailing-12-month (TTM) sales. Yes, analysts are expecting significant growth on a percentage basis. However, even at the top of the estimate table, we’re still only talking about revenue of less than $21 million.
That might not be worth it for prospective buyers. With many questions about the tech’s viability moving forward, investors will want to approach RGTI stock with caution.
