Morgan Stanley has raised its rating on quantum computing company Quantinuum (QNT.US) from Equal Weight to Overweight, lowered its price target from $78 to $62, and designated the stock as its "Top Pick" in the sector.
As of the time of writing, Quantinuum shares rose nearly 5% in Thursday's pre-market trading on the U.S. stock market.
In a note to clients, Morgan Stanley analysts wrote: "By 2040, quantum computing is expected to open up a market exceeding $100 billion, but differing hardware technology pathways make it difficult to compare companies, and current revenue levels across companies remain too small to differentiate their relative strengths and weaknesses."
The analysts stated: "We have built our own proprietary evaluation framework that examines what each company has already achieved across four main areas — technological progress, execution capability, manufacturability, and broader progress indicators. Currently, we assign the highest weight to technology, because in this area the existing evidence is the most substantial and the differences between companies are the most pronounced."
The analysts added: "Quantinuum stands out in terms of technology and execution capability. Among pure-play companies focused on quantum computing, it has made the most progress and has the strongest execution track record, yet the market has assigned it the lowest valuation multiple across the entire peer group — the lowest valuation multiple based on 2030 revenue forecasts."
The analysts further noted that regarding error correction frameworks in the quantum computing space, Quantinuum's progress is "the most advanced" and its execution record is also the strongest. However, the analysts pointed out: "The visibility factor implied by Quantinuum's current share price is only about 43%, the lowest across the entire peer group, whereas our assumed factor is 75%. IonQ has a slight advantage in manufacturability, which is why its visibility factor is relatively close to Quantinuum's. However, for Quantinuum, the gap between our assessment and market pricing is much wider."
The analysts also said that the upcoming quantum computer Sol will be Quantinuum's next catalyst, with the product planned for release next year. Additionally, the analysts maintained their Equal Weight rating on IonQ (IONQ.US) and initiated coverage on Infleqtion (INFQ.US) and Xanadu (XNDU.US), both with Equal Weight ratings.
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