Why QUBT Stock Is A Bad Buy: Complete Analysis
CANADA – 2025/04/23: In this photo illustration, the QCI (Quantum Computing) logo is seen displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Quantum Computing Inc. (NASDAQ: QUBT), a firm that develops quantum-compatible chips and photonic hardware for high-performance computing, artificial intelligence, and cybersecurity, experienced a 7% decline in its stock on October 22 due to a broader retreat in quantum stocks. This downturn is linked to uncertainties regarding changes in U.S. policy related to technology exports to China and Google’s announcement regarding Willow. Google’s Willow chip executed a repeatable algorithm 13,000 times faster than the finest supercomputers for a specific task. This achievement, known as “verifiable quantum advantage,” demonstrated that quantum systems can surpass classical computers in a consistent manner. Surely, the stock recovered the next day, up 7% to levels around $16.
The current situation is this – despite the recent volatility, we believe QUBT stock carries too much risk at around $16. While the technology of quantum computing holds immense potential, this specific stock poses many warning signs. Before we discuss the reasons why investors should steer clear, if you are looking for potential gains with lower volatility than investing in an individual stock, consider the High Quality Portfolio. It has significantly outperformed its benchmark—a blend of the S&P 500, Russell, and S&P MidCap indexes—and has produced returns exceeding 105% since its inception. Why is this the case? As a collective, HQ Portfolio stocks have delivered superior returns with less risk when compared to the benchmark index, providing a smoother ride, as illustrated in HQ Portfolio performance metrics.
Why Traditional Fundamentals Don’t Paint the Entire Picture
The uncomfortable reality about analyzing quantum stocks is that traditional fundamentals offer limited predictive insights when commercial applications are still several years away. Industry experts estimate that commercial quantum computing applications won’t materialize until 2030 at the earliest, with Google’s head of Quantum AI projecting a five-year timeline and more conservative forecasts pushing practical applications to 2035-2040.
Nevertheless, cash flow analysis is crucial within fundamentals, as these companies are consuming capital at unsustainable rates while generating minimal revenue. QUBT exemplifies this well – the company reported operating cash flow of negative $19 million against revenues of merely $0.3 million, which results in an OCF margin of negative 7,181%.
What Issues Exist with QUBT’s Business Model?
The core issue is straightforward: QUBT isn’t generating significant income. Revenue dropped 21.5% to only $0.3 million over the past year, with quarterly revenue nosediving 66.7% to a mere $61,000 in the latest quarter. To provide context, the company operates on a scale smaller than many food trucks, yet carries a $4 billion market cap.
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How High is Too High?
QUBT is trading at astronomical valuation multiples, with a price-to-sales ratio of 8,790 compared to 3.2 for the S&P 500. For perspective, you are effectively paying nearly 9,000 times the company’s annual sales to invest in QUBT – that’s not investing; it’s more akin to speculating on lottery tickets.
Can You Sustain These Losses?
The company is losing cash at an alarming rate. QUBT reported a net loss of $76 million with revenues of only $0.3 million, leading to a net income margin of negative 29,054%. To illustrate the scale: for every dollar of revenue, the firm loses $290. Even at its peak, Tesla never reached such a level of inefficiency.
As mentioned earlier, the fundamentals won’t make much sense as the narrative revolves around speculation about the future of quantum and QUBT’s role in it.
Is There Any Hope?
QUBT does have one advantage: financial stability. The firm maintains a minimal debt load of $1.5 million in relation to its $2.1 billion market cap, resulting in a debt-to-equity ratio of just 0.1%. Cash constitutes 81.9% of total assets at $349 million, providing a significant cushion.
However, this cash position exists mainly due to recent fundraising efforts amounting to over $1 billion in 2025, including a $200 million financing in June. Without growth in revenue, this cash becomes a countdown to insolvency.
How has QUBT Held Up in Market Downturns?
The stock’s resistance to downturns is weak. During the inflation shock of 2022, QUBT plummeted 93.1% from peak to trough while the S&P 500 fell by 25.4%. In the 2020 COVID pandemic, it decreased 72.9%, contrasting with a 33.9% drop in the broader market. When markets become unsettled, speculative quantum stocks like QUBT are often the first to suffer severe losses.
Recent performance reinforces this trend, with the stock sinking 35% in just one week and declining 26.5% over the last month as investors gravitate toward established tech firms. For more insights, see our piece on – What’s The Downside Risk For Quantum Computing Inc.?.
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What Lies Ahead?
Management indicates that significant revenue from photonic chip operations may be “12 to 18 months away,” yet this is more of a hope rather than a certainty. The quantum computing sector remains nascent, with commercial applications largely still in the realm of theory. Meanwhile, QUBT faces increasing loss estimates for 2025, ranging from 17 cents to 25 cents per share based on recent analyst revisions.
The Final Thought
QUBT embodies a precarious combination of sluggish growth, exceedingly poor profitability, and weak downturn resilience, all despite solid financial stability. The firm is trading at valuations that are disconnected from fundamental reality, consuming cash much quicker than it generates meager revenue.
Why would you want to pay nearly 9,000 times sales for a company that loses $290 for every dollar of revenue when you could invest in profitable, growing tech firms at reasonable valuations? For example, check out our article on – Google’s Unloved Stock Finally Gets Its Due.