Where Will Quantum Computing Inc. Be in 5 Years?

Quantum computing promises transformational progress in materials science and drug discovery, and investors have been willing to overlook dismal sales and earnings to ride what could be the next big tech wave after artificial intelligence.

It’s no wonder, then, as investors have been open to speculative investments over the past few years, that Quantum Computing Inc.‘s (NASDAQ: QUBT)The stock’s value has surged by over 400%.

But where is Quantum Computing, also referred to as QCi, headed over the next five years? I don’t think the trajectory is good amid the company’s fledgling technology, rising costs, and an increasingly lower appetite for risky investments.

The next five years could force QCi’s tech to sink or swim

QCi wasn’t always a quantum computing company. A little more than five years ago, it was called Innovation Beverage, which, as you might guess, was a beverage company. In 2021, the company made a hard turn toward quantum computing and changed its name and stock ticker.

Since that time, QCi has built a quantum computing fabrication facility, creating processors designed to function at ambient temperatures for use in quantum computing. This technology is different from its competitor’s.IonQ, which uses trapped ions for quantum computing…and must be kept inside extremely cold equipment to operate properly.

Less delicate chips capable of running at room temperature sound like a good idea, but so far, QCi’s tech has mainly been used for research purposes. NASA and a major automotive manufacturing company are testing the company’s processors, but there’s no guarantee that they or other major companies will purchase large quantities of QCi’s technology.

QCi has a lot to prove, and I think if we fast-forward five years, it’ll be clear whether or not the company’s technology has succeeded. Given that the company conveniently switched to quantum computing from beverages and that investors are treating it more like a meme stockI’m not entirely convinced it’s a sound, lasting investment.

QCi’s stock price surge in recent years might have created a sense of legitimacy among some investors that the company hasn’t fully justified. The progress of its technology in the coming half-decade will reveal if the recent hype is warranted.

The next five years will be expensive for QCi

Investors should understand that QCi will have to invest substantially in its developing technology in the future, with no assurance of a positive outcome. The company’s $1.6 billion cash reserve offers a strong financial cushion, but it is also spending aggressively while generating very little income.

As an illustration, QCi’s third-quarter sales were only $384,000, in contrast to an…operating lossamounting to $10.4 million. Investors might highlight the quarterly net income of $0.01 per share, a stark contrast to the $0.06 loss from the same period last year. However, this positive figure stemmed from a $9.2 million accounting benefit due to a mark-to-market adjustment of a derivative liability. Essentially, this gain is fleeting and doesn’t reflect fundamental improvements in the company’s financial health.

Furthermore, those looking to invest in QCi at this time will be paying a significantly inflated price for the company’s shares. Quantum Computing’sprice-to-sales (P/S) ratiois an astonishingly high 2,800, dwarfing the technology sector’s typical Price-to-Sales ratio, which hovers around 8.

This suggests investors are paying a hefty price for QCi shares, even though the company’s future in the quantum computing field is far from certain. As investors become less enthusiastic about risky ventures, thequantum computing marketA period of significant upheaval seems likely in the near future. Given QCi’s financial losses, minimal sales, and high stock valuation, investing in the company appears to be an unattractive option.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.