Investors hope that quantum computing could be the next big investing trend after artificial intelligence, and one of the most talked-about names among quantum computing stocks right now is D-Wave Quantum (QBTS +0.47%).
The company recently reported its second quarter results, and D-Wave stock immediately nosedived, even after a 1,120% increase in bookings.
So, is it time to pick up some of the company's shares after the recent decline? The data suggests you should avoid D-Wave stock for now.
Image source: The Motley Fool.
D-Wave shares are beyond expensive, and revenue is negligible
D-Wave's Q2 sales were just $3 million, slightly below sales from the year-ago quarter and missing Wall Street's consensus estimate of over $4 million. The company's loss per share of $0.13 improved from a loss of $0.42 in the year-ago quarter but fell short of the consensus estimate of a loss of $0.09.
While narrowing losses are a positive sign, D-Wave's inconsistent revenue growth is part of the reason why it's difficult to invest in the company right now. Its sales are choppy, often coming in cycles as D-Wave gains a new customer. This makes it hard to gauge the company's growth.
Most importantly, D-Wave's shares are very expensive at a time when the commercial viability of quantum computing is still in question. The stock has a price-to-sales (P/S) ratio of 496, which is beyond expensive and far higher than the average P/S ratio of about 8 for the technology sector. Typically, tech stocks trading at a high premium balance that out with fast-growing revenue. As I just mentioned, D-Wave doesn't have that.
All of the above means that D-Wave is an expensive stock, with uneven revenue, and significant losses. That's not exactly a recipe for success.
NASDAQ: QBTS
Key Data Points
Why it's worth keeping an eye on D-Wave
All that said, it's probably worth keeping an eye on where D-Wave is headed. One highlight from the quarter was D-Wave's $35.5 million in bookings, up 1,120% from the year-ago quarter. D-Wave's bookings indicate future revenue potential, though they aren't guaranteed sales.
Still, the large increase shows that D-Wave can attract customers for its quantum computing technology. Those bookings came on the heels of AT&T agreeing to expand its use of D-Wave's tech and potentially deploy it for "complex optimization challenges across its network operations."
It's still the early innings for quantum computing. This means that investors shouldn't be paying a high premium to own D-Wave's stock -- but they should be keeping a close watch on whether the company can turn its bookings into steady and growing revenue in the coming years.
