Rigetti Shares Down 15% Post Q1 Earnings: Time to Buy, Hold or Sell?

Core Viewpoint - Rigetti Computing (RGTI) has faced significant challenges in its first-quarter 2025 earnings, with a 15% drop in shares following a substantial revenue decline of over 50% year-over-year, raising concerns about its operational efficiency and market position [1][2]. Financial Performance - RGTI reported an adjusted loss per share of 8 cents and revenues of $1.5 million, missing Zacks Consensus Estimates by 60% for earnings and 40.2% for revenues [1][2]. - Operating expenses increased to $22.1 million, primarily due to higher compensation and tax-related costs, indicating ongoing challenges in scaling operations efficiently [2]. Market Position and Stock Performance - RGTI shares have underperformed compared to the Zacks Computer & Technology sector and industry peers, with a year-to-date decline of 35.4%, while the broader sector has decreased by 4.5% [3][4]. - The stock is currently trading at a price-to-book (P/B) ratio of 22.2X, significantly higher than the industry average of 5.87X, suggesting that investors are valuing the company based on its potential rather than current financial performance [19]. Growth Opportunities - Rigetti achieved a significant scientific milestone by integrating a hybrid microwave-optical quantum transducer with a superconducting qubit, which could enhance the scalability of quantum systems [7]. - The company applied its "quantum preconditioning" algorithm to a real-world energy grid problem, demonstrating practical quantum advantage and enhancing classical optimizers' performance [8]. - Rigetti's cash position stands at $237.7 million, providing a financial cushion amid short-term pressures [2]. Strategic Developments - Rigetti secured a $5.5 million grant from the U.S. Air Force and a $35 million investment from Taiwan's Quanta Computer, indicating growing institutional confidence in its quantum capabilities [2][12]. - The company was selected for DARPA's Quantum Benchmarking Initiative, which is a strong endorsement of its technical vision and positions it at the forefront of national quantum computing efforts [10]. Future Projections - Sales are projected to rise by 36.4% in 2025 and 153.3% in 2026, with EPS expected to turn positive, indicating improved operational efficiency [14]. - The global quantum computing market is anticipated to grow at a CAGR of 20.5% from 2025 to 2030, positioning Rigetti to benefit from this expansion [9].