Rigetti Computing Faces Volatility After 30% Drop Amid Quantum Computing Hype and Overvaluation Concerns

Technical Analysis

Rigetti Computing, Inc. (RGTI) experienced a significant downturn on December 19, 2024, closing at $7.47 for a -30.12% change. This sharp decline contrasts with its recent surge, where the stock rose over 700% in one month, highlighting extreme volatility. The RSI (Relative Strength Index) of 65 suggests that the stock is nearing overbought conditions, although it hasn't crossed the critical threshold of 70. The 50-day and 200-day moving averages, at $2.60 and $1.48 respectively, show a sharp upward trend, indicating strong bullish momentum over the medium to long term.

The MACD of 1.64 further supports a bullish outlook, suggesting that the stock may still be in an early to middle stage of upward momentum despite the recent fall. The ATR (Average True Range) at 19.67 reflects high volatility, validating the sharp price movements. Near-term support is at $7.38 with resistance at $8.43, providing key levels for short-term traders.

Fundamental Analysis

Fundamentally, Rigetti Computing is positioned in the rapidly growing quantum computing sector, capturing attention due to a notable increase in clientele and market presence. Despite these positive developments, the company's EPS (earnings per share) of -$0.37 and a negative PE ratio of -20.19 indicate that Rigetti is currently unprofitable. The market cap of $1.81 billion reflects substantial investor interest, indicative of future growth expectations rather than current earnings performance.

The DCF (Discounted Cash Flow) calculation of -$7.47 demonstrates that the stock may be overvalued based on traditional valuation models. Analyst price targets remain at a consensus of $2, significantly below current trading levels, suggesting that the market might be overly optimistic about its prospects.

Intrinsic Value and Long-Term Potential

Rigetti Computing's intrinsic value appears to be significantly lower than its current market price, based on traditional valuation measures. The company's potential in the quantum computing space offers long-term growth opportunities, although significant risks remain due to the early stage of industry development and technological challenges. The stock's recent rapid ascent may have priced in much of this future growth, suggesting limited upside unless substantial advancements are made.

Outlook and Evaluation

Considering the recent news highlighting Rigetti's rapid market rise and the surging interest in quantum computing, the stock is positioned at a critical juncture. For the next trading day, December 20, 2024, investors could expect continued volatility. Over the upcoming week, the stock's performance will likely hinge on investor sentiment as well as broader market movements in the tech sector.

Despite strong recent bullish momentum, the combination of high valuations, technical overbought signals, and an inflated market cap relative to earnings suggests a cautious outlook. Based on this analysis, Rigetti Computing can be evaluated as a 'Hold' candidate. While long-term potential exists due to the quantum computing industry's promise, the near-term risk factors necessitate a pause before further capital allocation, particularly for risk-averse investors.