D-Wave Quantum Faces Volatility Amid High RSI and Profitability Concerns, Rated 'Hold'

Technical Analysis

D-Wave Quantum Inc. (QBTS) closed on December 9, 2024, at $4.65, experiencing a significant daily loss of 8.10%. The stock’s recent volatility is evident from its wide range for the day from $4.43 to $5.31, touching near its 52-week high of $5.38. The Relative Strength Index (RSI14) stands at 82, indicating the stock is currently overbought and may face a potential pullback. The stock is trading well above its 50-day and 200-day moving averages, with an extraordinary momentum as indicated by the MACD (3-month) of 0.62. The stock's Average True Range (ATR) of 11.56 suggests high volatility, necessitating cautious short-term trading strategies. Current support is at $3.78, with resistance at $5.06, implying a possible upward movement may face significant headwinds at resistance levels.

Fundamental Analysis

D-Wave Quantum holds a market cap of approximately $1.14 billion. The quantum computing sector remains in a nascent stage with the potential for massive growth, as highlighted by recent stock interest. However, the company's fundamentals reveal concerns, as evidenced by a trailing twelve months EPS of -$0.41 and a negative P/E ratio of -12.44, demonstrating current unprofitability and sector underperformance in earnings. The company’s discounted cash flow (DCF) analysis suggests a negative intrinsic value, raising concerns about its current valuation relative to intrinsic business conditions and future cash flow projections.

Near-Term Predictions

For the upcoming trading day on December 10, 2024, given the high volatility and tight range, QBTS might experience continued price fluctuations around key resistance at $5.06. The coming week could witness a test of support levels given the overbought RSI, although sector enthusiasm and market momentum could spur additional upward movement towards the resistance level.

Long-Term Investment Potential

Long-term growth prospects for D-Wave Quantum hinge on its ability to capitalize on the emerging commercialization of quantum computing. Recent media exposure, such as CEO Dr. Alan Baratz's interview discussing quantum computing's impact, is pivotal in shaping positive market sentiment. However, the current lack of profitability, negative intrinsic value, and high market expectations pose considerable risks.

Overall Evaluation

Considering current technical overextension and fundamental gaps, D-Wave Quantum Inc. should presently be categorized as a 'Hold.' While the quantum computing industry offers significant future potential, the company must demonstrate a path to profitability and address intrinsic valuation concerns to justify future price increases. Investors should watch for advancements in its commercial applications and monitor industry dynamics closely.