Last Update 24 Jul 26
Fair value Decreased 23%QUBT: NHanced Acquisition And Fab Expansion Will Drive Future Commercial Upside
Analysts have trimmed their fair value estimate for Quantum Computing from $23.67 to $18.33, as updated assumptions point to a higher discount rate, very large projected revenue growth, a much thinner profit margin, and a lower future P/E multiple.
What’s in the News for Quantum Computing
- Quantum Computing Inc. completed a US$73.1m cash and stock acquisition of NHanced Semiconductors, with potential earnout payments up to US$72m tied to revenue and EBITDA milestones, and is launching a Fab 2 facility to expand nanophotonics and semiconductor manufacturing capacity. (Source: Quantum Computing Inc. acquisition announcement)
- NHanced will operate as a wholly owned subsidiary, supporting existing customers while helping Quantum Computing Inc. commercialize thin film lithium niobate photonic integrated circuits and the Dirac quantum optimization platform. (Source: Quantum Computing Inc. acquisition announcement)
- Quantum Computing Inc. secured a purchase order and framework agreement with Planck Dynamics for five NeuraWave photonic reservoir computer systems, with a potential aggregate program value above US$10m if future milestones are met. (Source: Planck Dynamics agreement)
- The company filed a US$118.52m equity shelf registration related to 13,544,946 shares of common stock and received shareholder approval to increase authorized common shares from 250,000,000 to 450,000,000, expanding total authorized capital stock to 460,000,000 shares. (Source: company filings and shareholder vote)
- Quantum Computing Inc. was added to several Russell value and small cap benchmarks, including the Russell 3000E Value, Russell 3000 Value, Russell 2000 Value, Russell Small Cap Comp Value, and Russell 2500 Value indices. (Source: index provider announcements)
Valuation Changes
- Fair Value: trimmed from $23.67 to $18.33, a reduction of roughly one quarter in the fair value estimate for Quantum Computing.
- Discount Rate: moved slightly higher from 8.20% to about 8.51%, indicating a modestly higher required return in the updated model.
- Revenue Growth: revised from about 216% to a projected rate of roughly 283%, reflecting a meaningfully stronger growth assumption for future dollar revenue.
- Net Profit Margin: adjusted from about 6.19% to roughly 0.73%, pointing to a much thinner expected profitability level.
- Future P/E: reset from a multiple of about 7,710x to roughly 3,624x, which remains very high but represents a sizeable reduction in the valuation multiple used.
Catalysts
About Quantum Computing
Quantum Computing Inc. develops room temperature, integrated photonic quantum systems and thin film lithium niobate chips to deliver practical quantum computing, AI acceleration and secure communication solutions to commercial, government and research customers.
What are the underlying business or industry changes driving this perspective?
- Acceleration of AI and data center workloads is driving urgent demand for energy efficient, high speed computing. This is positioning QCi’s room temperature photonic quantum and reservoir computing platforms to scale from small research contracts to larger production deployments, which should expand revenue and support higher gross margins as volumes increase.
- Global upgrade cycles in telecom and datacom toward higher bandwidth optical networks, reinforced by industry recognition of thin film lithium niobate as a next generation transceiver platform, create a pathway for Fab 1 and Fab 2 to ramp foundry services and product sales. This may improve capacity utilization and lift operating leverage and earnings over time.
- Rising awareness of quantum enabled cyber threats and the need for quantum secure networking at major banks, cloud providers and governments gives QCi a growing funnel for its quantum communication and authentication systems. This supports a transition from pilot projects to recurring deployment revenue and healthier long term net margins.
- The move from prototype systems to planned volume manufacturing by the end of the decade, supported by over $1.5 billion of newly raised capital and a low liability balance, allows QCi to invest aggressively in automation, yield improvement and design reuse. These efforts should help reduce unit costs and support sustained improvement in gross margin and earnings power.
- Expanding collaboration with ecosystem partners such as POET Technologies, membership in industry consortia and early wins with global automotive, financial and aerospace customers enhance QCi’s credibility and market access. This increases the probability of larger multi year contracts that can smooth revenue growth and spread SG&A over a broader sales base.
Assumptions
How have these above catalysts been quantified?
- Analysts are assuming Quantum Computing's revenue will grow by 283.0% annually over the next 3 years.
- Analysts assume that profit margins will increase from -916.2% today to 0.7% in 3 years time.
- Analysts expect earnings to reach $1.8 million (and earnings per share of $0.01) by about July 2029, up from -$39.7 million today.
- In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 3628.0x on those 2029 earnings, up from -44.6x today. This future PE is greater than the current PE for the US Tech industry at 41.2x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.51%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?
- The company is counting on a long runway of rapid AI and quantum adoption, but current revenue remains very small at approximately $384,000 in the quarter and is heavily tied to a handful of R&D and custom contracts. Any slowdown in industry adoption or failure to convert pilots into repeatable products could limit top line growth and delay meaningful revenue scale.
- QCi is aggressively scaling headcount, manufacturing capacity and R&D ahead of proven demand, which is already driving operating expenses to $10.5 million in the quarter. Management expects SG&A to keep rising, creating a structural risk that costs grow faster than revenue and compress operating margins and earnings over the long term.
- The strategic bet on thin film lithium niobate and photonic quantum architectures assumes this approach will become a dominant standard. Competing quantum and semiconductor platforms may win out or commoditize TFLN capacity, which would undermine utilization of Fab 1 and Fab 2 and pressure gross margin and return on invested capital.
- The large $1.5 billion capital raise has strengthened the balance sheet, but also brings expectations for acquisitions and aggressive expansion in an unsettled M&A market. Overpaying for targets, integration missteps or dilutive deal structures could weigh on shareholder returns and future earnings power.
- Much of the near-term profitability is driven by non-operational items such as derivative liability revaluation and interest income, while the core business produced a net loss of $17.1 million over nine months. If financial markets normalize and mark-to-market gains and interest fade, underlying losses could re-emerge and negatively impact net income and equity value.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The analysts have a consensus price target of $18.33 for Quantum Computing based on their expectations of its future earnings growth, profit margins and other risk factors.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $10.0.
- In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $243.4 million, earnings will come to $1.8 million, and it would be trading on a PE ratio of 3628.0x, assuming you use a discount rate of 8.5%.
- Given the current share price of $7.86, the analyst price target of $18.33 is 57.1% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
