D-Wave Quantum Inc. (QBTS:NYSE), a Canadian quantum computing solutions provider, saw a boost in target price by ROTH Capital Partners after releasing adjusted Q2/23 and full-year 2023 (FY23) revenue guidance, reported analyst Suji Desilva in a July 21 research note.
"We believe investor interest in the growth opportunity in quantum computing is intensifying," ROTH's Desilva wrote.
Attractive Gain Implied
ROTH's new target price on D-Wave is US$5 per share, up from US$2, and the company is currently trading at about US$2.75 per share, noted Desilva.
The gap between these prices reflects a compelling return for investors of 82%. D-Wave remains a Buy.
Alignment With Contract Timing
D-Wave updated its Q2/23 revenue guidance to better reflect when it will actually receive revenue from its service contracts, Desilva reported. The company's revised guidance for the quarter is US$1.65–1.85 million ($1.65–1.85M). This is lower than the consensus forecast of about US$2.2M.
Despite the change, Desilva wrote, "We believe that cash collections remain strong and that the shifted timing increases visibility into our H2/23 revenue forecast."
Additionally, D-Wave's bookings improved during Q2/23 and are up 146% over this time last year. The company's average deal size is up year over year, too, by 136%. Further, D-Wave expanded its customer base during Q2/23 and showed progress with planned government quantum initiatives.
These achievements bode well, noted Desilva, for future growth, specifically for a recurring revenue run rate that increases incrementally over the ensuing several quarters.
Profitability Outlook Good
For FY23, D-Wave widened its revenue guidance range to US$11–13M, and it reflects a year-over-year increase of 50–80%.
Desilva commented, "We believe the company has healthy visibility into this growth with increasing deal sizes, shortened design win cycles, and a 90%-plus existing customer renewal rate."
Improved Cost Control
Also, for FY23, D-Wave guided to a lower EBITDA loss than it previously had, ($58M) versus ($62M), reported Desilva, due to a better handle on costs.
"[The company] continues to leverage its US$50M term-loan facility by drawing down an incremental US$15M in the quarter," Desilva added.
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- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Roth, D-Wave Quantum Inc., July 21, 2023
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from D-Wave Quantum Inc.. ROTH makes a market in shares of D-Wave Quantum Inc. and as such, buys and sells from customers on a principal basis. Shares of D-Wave Quantum Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2023. Member: FINRA/SIPC