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Investment Thesis
Rigetti Computing, Inc. (NASDAQ:RGTI) stock is on fire after Q2 earnings release. Revenue growth demonstrates strong momentum, and the company delivered solid improvement in cost control, which enabled the company to push the gross margin above 80% and decrease operating losses.
While Rigetti's financial performance is improving notably, the company is still burning cash, and the management expects that it will face the need to raise additional capital in late 2024. Given the harsh environment and tight credit conditions, this can be a difficult task. The company operates in a rapidly evolving quantum computing industry, but there is a vast level of uncertainty regarding the company's ability to achieve profitability in the foreseeable future. Moreover, the valuation does not look attractive. All in all, I do not recommend buying and assign the stock a "Hold" rating.
Rigetti Computing Financials
RGTI went public in March 2022. Therefore, the history of earnings is relatively short. But we can see the impressive revenue growth trend, though comps are easy to beat. The company is far from generating operating profits, with substantial losses. So is the free cash flow [FCF] margin, whether stock-based compensation [SBC] is included or not.
Rigetti Computing financial performance
Author's calculations
Bottom Line
To conclude, Rigetti Computing, Inc. stock does not look like a "Buy" to me. Overall, the quantum computing industry looks promising, with a massive growth potential. But Rigetti is in its early stages of development, and there is a very short history of operations, which makes future projections highly uncertain. The company is still burning cash and does not look attractive. $Rigetti Computing(RGTI)$
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