Rigetti Computing, Inc.: Buy, Sell, or Hold for 2025

Key Points

• Quantum computing is in the spotlight, but the bubble formed in late 2024 has also burst.
• Advances are being made, but it could be another ten years before practical QC becomes available. 
• Analysts are hopeful but see this stock returning to the $5 range, and short-sellers are helping it get there. 

Rigetti Computing NASDAQ: RGTI is making great strides with its quantum computing technology, offering investors a high-reward opportunity. Quantum computing is the next level, potentially providing exponentially more computing power than today's most advanced traditional computers. However, this stock also carries high risks, including concerns about capitalization, dilution, and whether it can even cross the finish line.

The most likely scenario for this stock in 2025 is volatility, with a chance of retesting long-term lows and hitting new highs. 

What Does Rigetti Computing Do?

Rigetti Computing is a leading manufacturer of quantum computers and the processors that drive them. Revenue is primarily driven by its cloud-based quantum-computing-as-a-service business. Its claims to fame are its commercially available 9-qubit processor and its industry-leading multi-chip processor, which is expected for full commercial release by mid-year.

The Ankaa-3 is a scalable device that provides 82 qubits of processing power and is available on Rigetti’s Quantum Cloud Services platform. It is slated to be released on Amazon’s Braket and Microsoft Azure Quantum before mid-year. Other catalysts in 2025 include the expected launch of a new architecture, including a 32-qubit system linking four chips. 

The outlook for Rigetti Computing revenue growth is robust, and growth is expected to reach high-double to low-triple-digits by the decade's end. However, the forecasts may be aggressive due to sluggishness and underperformance in 2024.

The 2024 results have the company on track to produce about $12 million in revenue, which is insufficient to make profits given the intense capital requirements of R&D and manufacturing. Regarding profits, the company is not expected to reach profitability until sometime in the 2030s and may not achieve its goal. Operating expenses in Q3 2024 were $18.4 million or nearly 8X the revenue and unlikely to decline significantly over time.

The company is sufficiently capitalized for 2025, but it comes at a cost, and there are risks. The company diluted its stock by 30% in the first nine months of F2024 and compounded it with an additional sale in Q4. Execs believe the business is sufficiently capitalized and won’t need to raise additional capital, but it is questionable.

With quarterly losses running in the $15 to $20 million range and without a significant advancement, the company will likely run out of cash before the decade's end, years before it reaches profitability. 

Mixed Sell-Side Support Points to Volatility 

The analysts and institutions are optimistic about this stock, rating it as a Buy in the first case and buying on balance for four consecutive quarters in the second. Still, there are offsetting factors to drive volatility.

Among them are the consensus price target, which is 30% below the mid-January price action, insiders selling into the rally, and a high-short interest. The short interest and short-covering are central to the stock's explosive rise in late 2024 but are unlikely to have left the market.

The more likely scenario is that short interest, ramping higher in Q4 2024 to over 20%, remains high due to repositioning, a sentiment echoed in the charts. 

Shares of RGTI surged more than 1000% in Q4 2024 on news, including Google’s advances with its Willow chip and systems. However, the rise was capped by comments from NVIDIA NASDAQ: NVDA CEO Jenson Huang, who doubted the timing of practical quantum computers operating at scale. In his view, useful quantum computing won’t be viable for at least ten years, pushing the outlook for revenue growth and profitability out by nearly a decade.

NVIDIA collaborates in quantum computing, partnering with Rigetti to develop practical hybrid workflow, so Mr. Huang is in a position to know. 

The impact on RGTI stock price is a 70% pullback from the highs, a move creating significant overhand for this market. Rigetti's share price may bounce back, but setting new highs is unlikely, and how deep the market moves before rebounding is yet to be seen. The best target for support is near the cluster of moving averages at $3.65.