Needham analyst Quinn Bolton initiated coverage on D-Wave Quantum Inc (NYSE:QBTS) with a Buy rating and a price target of $2.5.

As per the analyst, d-Wave stands out as a pure-play entity in the quantum computing industry, primarily focusing on commercial applications through its proprietary quantum annealing technology.

This differentiates D-Wave from its competitors, as it derives 70% of its revenue from commercial customers by leveraging its technology to tackle real-world optimization challenges.

Bolton said this commercial focus is noteworthy, especially compared to peers who rely significantly on funding from academic institutions or government laboratories.

The initiation of this coverage coincides with his belief in the transformative potential of quantum computing. As per the analyst, this technology will likely revolutionize the computing industry by dramatically accelerating computation times for specific algorithms and solving problems beyond classical computers' reach.

Bolton's comprehensive analysis, published on June 7, 2022, flagged four primary applications of quantum computing: Optimization, Simulation, Machine Learning, and Cryptography.

Investing in quantum computing now mirrors the early days of AI investment, marking a pivotal shift from academic exploration to commercial implementation.

Bolton said advancements in quantum computing hardware and the achievement of quantum superiority across an expanding array of applications support the anticipated growth of the addressable market.

Despite the current stage of infancy in quantum adoption and the prevalent EBITDA-negative status among quantum computing companies, including D-Wave, he foresees significant growth potential.

Bolton noted that d-Wave has successfully positioned itself at the forefront of the quantum computing industry's move towards commercial application, particularly in solving optimization problems.

Its annealing technology is especially well-suited for these tasks, making D-Wave the sole provider of annealing computers at a commercial scale.

This strategic focus has enabled D-Wave to secure a majority of its revenue from commercial entities, setting it apart from competitors like IonQ, Inc (NYSE:IONQ) and Rigetti Computing, Inc (NASDAQ:RGTI), which are more reliant on academic and government support, he said.

In the future, D-Wave will expand its Total Addressable Market (TAM) by developing a superconducting gate model quantum computer. As per the analyst, this expansion aims to cater to a broader range of applications beyond annealing.

The investment in gate model development is reflected in our operational expense projections. He noted that D-Wave's experience in superconducting-based annealing technology will provide a solid foundation for this endeavor.

Although the gate model solution is not likely to be market-ready for another 3-5 years, D-Wave's leadership is optimistic about tapping into a quantum TAM projected to reach $100 billion by 2030, encompassing both annealing and gate model technologies.

Bolton projected first-quarter revenue and EPS of $2.9 million and $(0.09). D-Wave Quantum stock has surged 118% in the last 12 months.

QBTS Price Action: D-Wave Quantum shares traded lower by 2.45% at $1.83 on the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors