TLDR
- Rigetti Computing (RGTI) stock tumbled 8.8% Thursday closing at $14.99 on 34.94 million shares traded
- TD Cowen downgraded to hold citing $300 million fab requirement by 2028 against current $525 million cash position
- Company excluded from DARPA’s QBI Stage B program losing access to $1 million+ quarterly funding opportunities
- RGTI trades at 255x EV/Sales compared to IonQ at 205.7x and D-Wave at 167x despite lagging revenue growth
- Latest quarter showed $1.95 million revenue (down 18.1% YoY) but EPS of -$0.03 topped -$0.05 forecast
Rigetti Computing stock fell 8.8% Thursday after a top Wall Street analyst downgraded shares on funding and competition concerns. The quantum computing stock closed at $14.99 with trading volume 7% above average.
TD Cowen’s Krish Sankar cut his rating from buy to hold but maintained earnings estimates. He removed his price target, signaling increased uncertainty about the company’s path forward.
The analyst outlined three specific risks that changed his outlook on Rigetti stock. Each issue raises questions about the company’s ability to compete in the rapidly evolving quantum computing market.
New Fab Requirements Create Cash Pressure
Rigetti may need to build a new fabrication facility by 2028 to improve chip performance. The company targets 99.9%+ fidelity using modular chiplet designs and advanced semiconductor equipment.
A new 200mm or 300mm fab would cost more than $300 million. Rigetti currently holds $525 million in cash but spends $70-80 million annually on operations.
The company’s 108-qubit Cepheus-1 chip already experienced a one-quarter delay. Sankar views this as evidence of quality challenges that could worsen as Rigetti scales toward 10,000+ qubits.
Missing DARPA Program Hurts Growth Prospects
Rigetti failed to win selection for DARPA’s Quantum Benchmarking Initiative Stage B program. Sankar called this development surprising and troubling for the company’s competitive position.
Stage B offers participating companies $1 million or more in quarterly funding. Stage A provides just $300,000 per quarter in comparison.
Beyond the funding gap, QBI Stage B grants access to multi-year defense contracts and insights into government requirements. Losing out suggests competitors are making faster technical progress.
Valuation Looks Stretched Versus Peers
Rigetti trades at a 255x enterprise value-to-sales multiple despite weaker fundamentals than rivals. IonQ trades at 205.7x while D-Wave sits at 167x.
The premium appears hard to justify based on recent results. Fourth quarter revenue totaled $1.95 million, missing the $2.17 million estimate and falling 18.1% year-over-year.
Rigetti did beat earnings expectations with a loss of $0.03 per share versus forecasts of -$0.05. However, the company posted a negative net margin of 4,741.49% and analysts expect full-year losses of $0.34 per share.
Sankar believes 2027 revenue projections look too optimistic given limited customer wins on the horizon. He now sees Rigetti as offering only balanced risk-reward at current prices.
Benchmark also cut its price target from $50 to $40 while keeping a buy rating. The consensus among 12 analysts remains moderate buy with a $32.60 average target, implying 117% upside.
Eight analysts rate the stock a buy, three say hold, and one recommends sell. The company aims to deliver a 1,000+ qubit system by 2027 with 99.8% two-qubit fidelity.
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