Quantum computing is a revolution – GuruFocus.com

Quantum Computing Inc. (QUBT, Financial) stands out as an excellent potential investment in the disruptive but nascent quantum computing industry.

Solve complex problems

According to TechTarget, quantum computing theory explains the nature and behavior of energy and matter at the atomic and subatomic levels. Current computing is based on algebraic principles. Quantum supercomputers compute qubits, resulting in a massive increase in storage and speed. They solve complex problems that conventional computers struggle to solve by running complex simulations of complex systems.

In their early days, FutureLearn.com notes that quantum computers are difficult and expensive to build. Computers are error prone and there are hardware development and stability issues. They require massive investments in cooling costs and basic infrastructure. Moreover, specialists are needed to design, build and operate these computers.

Needless to say, these companies need a lot of capital to stay in business. In recent years, the pace of investment has accelerated among large companies.

An example is Microsoft Corp. (MSFT, Financial), whose Azure Quantum service builds and runs quantum algorithms for multiple platforms at once. Alphabet Inc. (GOOG, Financial)(GOOGL, Financial) Google Quantum AI develops software and hardware. Google researchers claimed three years ago to have achieved quantum supremacy when their Sycamore quantum supercomputer ran in 200 seconds; the exercise was an abstruse calculation that they claimed would immobilize a supercomputer for 10,000 years. In addition, International Business Machines Corp. (IBM, Financial) released its Q System One two years ago, while Nvidia Corp. (NVDA, Financial) is partnering with other companies on the next generation of computers. In August 2020, Amazon.com Inc. (AMZN, Financial) launched Amazon Braket, which is a cloud-based quantum computing service. By 2023, Fujitsu Ltd. (EAST: 6702, Financial) will be the first company to provide research derived from quantum computers.

According to Matthew Humphries of PC Magazine, “the hope is that quantum computing can have a major positive impact in a range of fields, including chemicals, pharmaceuticals, automotive and finance.”

New to the game

Founded in 2001, Leesburg, Virginia-based Quantum Computing is a newer player in the space, as it was originally created to sell inkjet cartridges online. According to The Quantum Insider, he then became a beverage distributor in 2007.

In 2018, the company announced its decision to focus on quantum computing and revealed its new name.

Quantum computing is now in the early stages of commercializing software tools and applications that harness new quantum computing capabilities for businesses, rather than focusing on hardware. Its Qatalyst program is a quantum accelerator that allows developers to build and run quantum-ready applications on conventional computers to run on quantum computers.

The company made its first acquisition in June. The addition of QPhoton expands its ability to develop photonic-based quantum systems. Knowledge gained from QPhoton complements Quantum’s entropy quantum computer, Dirac. The main advantage is that Dirac deploys at room temperature as a rack-mountable server without special infrastructure, so no underground cooling environment is required.

In an August letter to shareholders, Quantum Computing CEO Robert Liscouski said he believed the company offered a real-world problem-solving solution that gave him three to five years of business. ahead of the competition.

“Quantum information processing to solve real-world problems is now available and this is just the beginning,” he said. “World-class talent will be at the center of QCI’s transformation into a true force in the quantum information industry.”

Initial numbers

At the end of 2021, Quantum Computing reported total assets of $17.3 million. Six months later, the company reported total assets of $91.9 million, but that included fixed assets net of amortization, security deposits, intangible assets of $25 million and goodwill of nearly $60 million.

The market cap of the company is $84.76 million.

Total revenue for the six months ended June 30 was $96,000. Total operating expenses amounted to $11.5 million, leaving a cumulative net loss of $12.23 million. The loss per share was 42 cents. The company has no debt.

Based on the GF score of 40 out of 100, the company currently has low performance potential.

It received a high financial strength rating of 8 out of 10 and a moderate strength rating of 6 out of 10. The financial strength rating is arguably a little optimistic since the company has a cash trail of less than one year. This could dilute shareholders by issuing more shares to raise funds.

Quantum’s stock is more volatile than the market as its 52-week high was near the initial public offering price, hitting $8.90. The stock fell to a low of $1.42 in May in anticipation of the acquisition.

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On September 20, Quantum Computing announced the launch of the Dirac1 subscription service, initiating the monetization of its research and development. The commercially available service provides web-based access to programs capable of solving problems with up to 5,000 variables on an hour-per-month basis to a fully dedicated system.

In October 2021, institutional ownership made its appearance. Currently, Quantum Computing has 33.9 million shares outstanding. About 5.4%, or 1.83 million shares, are held by institutions. Nearly 14% is held by insiders and 74.33%, or approximately 25 million shares, are free float.

Positive calculation

The large percentage of business ownership is a positive sign. The increase in institutional ownership suggests that confidence is growing in small business. At the end of June, Quantum Computing joined the Russell Microcap Index. Liscouski called the event a significant milestone. The stock price has fallen more than 60% in the past year, but the short interest is less than 2%.

The quantum computing industry is expected to expand at a compound annual growth rate of 35.2% by 2028. This will undoubtedly drive the growth of Quantum Computing revenue. The company could also benefit from government cash injections.

The U.S. Department of Energy has allocated $166 million over five years to help build quantum computing capacity and $500 million over the same period to build large-scale quantum computing network infrastructure nationwide. under the CHIPS and Science Act. The US National Quantum Initiative has injected more than $1 billion in other federal funds.

I predict that companies will increasingly turn to quantum computing, as the company offers software that can run on currently available hardware; return on equity will double over the next 12 months and, with proper marketing, the stock has the potential to exceed $3.25 per share.

Conclusion

Quantum computing may seem like a niche industry in the early days of research and development, but it is attracting the attention of big corporations, investors, and government officials. History suggests that companies with deep pockets are looking to buy early assets rather than fully commit to building them. The massive influx of money into the rapidly changing industry makes Quantum Computing’s position in the market a great long-term investment.

About Mariel Baker

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