Quantum computing development route recognized, Mizuho raises target price for D-Wave Quantum (QBTS.US) to $35.

Quantum computing company D-Wave Quantum (QBTS.US) saw a sharp increase in its stock price by over 11% on Monday, after Mizuho Securities raised its target price for the company following its first analyst day event and reiterated its optimistic view on the company's long-term development. Mizuho analyst Vijay Rakesh raised D-Wave's target price from $29 to $35 while maintaining an "outperform" rating. Rakesh stated that D-Wave continues to maintain its leading position in the field of Annealing Quantum Computing and has shown a clear technical roadmap towards Fault-Tolerant Gate-Based Quantum Computing, which greatly enhances market confidence in the company's long-term growth prospects. Four positive signals released on analyst day Rakesh pointed out in the report that the most important takeaways from the analyst day were focused on four key areas. Firstly, the company updated its roadmap for gate model quantum computing. According to the latest plans, D-Wave aims to achieve 10 logical qubits by 2030, with a possible increase to 100 logical qubits by 2032. Logical qubits are considered an important indicator of a quantum computer's actual commercial capabilities in the field of quantum computing. Achieving more logical qubits means the system can perform more complex and commercially valuable computational tasks. Secondly, the company unveiled its dual-platform development strategy for annealing quantum computing and superconducting quantum computing. D-Wave expects the total addressable market (TAM) to reach $450-850 billion by 2040, with gate model quantum computing potentially covering around 75% of future market demand. Analysts noted that this indicates D-Wave not only aims to consolidate its leading position in the optimization computing field but also seeks to enter the broader general quantum computing market. Thirdly, the company has made progress in quantum error correction technology. According to management, their technical roadmap can control the quantum error correction cycle within 5 times, while having better scalability than other mainstream solutions. Quantum error correction is considered one of the core technical challenges in the commercialization of quantum computing, so this progress is highly anticipated by the market. Fourthly, the company has revealed its long-term profit targets for the first time. D-Wave expects the long-term gross profit margin for quantum computing as a service (QCaaS) business to reach 65-75%. At the same time, the gross profit margin for professional services is expected to reach 40-50%, and the gross profit margin for quantum computing system sales business is expected to reach 75-90%. Potential for further improvement in overall profitability Rakesh pointed out that as D-Wave gradually increases quantum computing system sales in the future, the company's overall profitability is likely to improve further. Currently, the company's overall gross profit margin is around 71%. Rakesh stated, "With an increasing proportion of systems sales, we believe the company has significant room for margin improvement in the future." Meanwhile, he believes that research and development spending will remain the largest operating expense item in the coming years. According to the company's plans, D-Wave will continue to advance its superconducting quantum computing roadmap and aims to achieve the goal of 10 logical qubits by 2030. Analysts believe that the research and development investment during this phase will lay the foundation for future commercialization. Potential growth in cloud quantum computing business is being watched Mizuho also specifically mentioned the development prospects of the company's quantum computing as a service (QCaaS) business. Currently, D-Wave has deployed 4 quantum computing systems to run in the cloud. Management expects each system to contribute approximately $25-30 million in revenue per year in the future. With increased demand for quantum computing from enterprise customers, this business is expected to become a significant growth engine for the company in the future. Currently, more and more companies are renting quantum computing power directly through cloud platforms without the need to purchase expensive hardware equipment. The market generally believes that this model has certain similarities with the development path of the cloud computing industry. Accelerating the layout of gate model quantum computing after acquiring QCI In addition to its traditional areas of strength, D-Wave has recently been accelerating its expansion into the gate model quantum computing business. Mizuho pointed out that by acquiring assets related to Quantum Computing Inc. (QCI) and advancing Dual-Rail Qubit technology, the company is quickly entering a broader quantum computing market. Rakesh stated, "D-Wave is currently a leader in the field of optimization quantum computing tasks, and the gate model quantum computing business is also advancing rapidly. With the development of the QCI acquisition and the Dual-Rail Qubit technology, the company has further solidified its position as the world's only dual-platform quantum computing company." Wall Street continues to bet on the long-term commercialization prospects of quantum computing In recent years, as the artificial intelligence industry has rapidly developed, quantum computing has once again become a focus of the capital markets. The market generally believes that quantum computing is expected to play an important role in drug development, material science, financial optimization, logistics scheduling, and artificial intelligence training in the future. Although the industry is still a long way from large-scale commercialization, more and more institutions are starting to view companies with clear technical roadmaps and business models as long-term beneficiaries. For D-Wave, its dual-platform strategy for annealing quantum computing and gate model quantum computing is becoming one of the key reasons why Wall Street is optimistic about the company. Mizuho believes that as the quantum computing market matures and the company's technical roadmap continues to be realized, D-Wave is expected to maintain its industry-leading position and share the dividends of the rapid development of the quantum computing industry in the coming years.