Why Did Rigetti Quantum Stock Pop Today?
Key Points
BMO Capital analyst Harsh Kumar recommended buying D-Wave Quantum stock today.
He did not recommend buying Rigetti -- but Rigetti stock is going up even more than D-Wave.
Both companies are burning cash, but D-Wave at least has more cash to burn than Rigetti.
D-Wave Quantum (NASDAQ: QBTS) stock jumped 6.9% through 1:10 p.m. ET Friday after BMO Capital analyst Harsh Kumar initiated coverage of the quantum computing stock with an outperform rating. Considering that Kumar predicted that D-Wave stock would nearly double over the next year, and hit $35, that's not surprising -- but here's something that is surprising: D-Wave rival Rigetti Computing (NASDAQ: RGTI) stock shot up 9.6% today.
And Kumar didn't mention Rigetti at all!
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Why BMO loves D-Wave Quantum
In his note this morning, Kumar said D-Wave stock is "best positioned in the quantum space to have commercial success" based on its two-pronged approach to quantum computing, which explores both annealing and gate models to reach accurate conclusions.
Now, Kumar may be right about D-Wave being the "best" quantum stock. This wouldn't necessarily make Rigetti a bad quantum stock -- just not quite as good as D-Wave. In that case, while Rigetti stock rising some today on general enthusiasm for quantum stocks might make sense, it makes no sense for Rigetti stock to be going up more than D-Wave!
D-Wave is better than Rigetti stock
Consider, too, that while both companies are unprofitable (and likely to remain so for years), Rigetti is in a more vulnerable financial position than D-Wave in the near term. With only $394 million in cash, Rigetti is likely to run out of cash by 2030, according to analyst forecasts of future cash burn. D-Wave, with a cash war chest of $546 million, probably has enough cash to last through 2031 or so before needing to raise more.
On its own, this may not be the strongest argument for buying D-Wave. ("It's unprofitable and burning cash.") It's certainly an argument for preferring it over Rigetti, however.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.