Quantum computing focuses on developing computer technologies based on quantum theory. The computing method uses a qubit or a quantum bit made by the quantum system. Quantum computing is widely considered the next frontier of electronic computation.
Quantum approaches to computing have the potential to boost many industries. Big names in the tech space, such as Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and International Business Machines Corporation (IBM) have invested heavily in quantum computing projects, and academic institutions are also exploring possibilities in the field. The global quantum computing market size is expected to grow at a 25.4% CAGR between 2021 - 2030. The growth is expected to be driven mainly by increasing private investment in quantum computing. In addition, Quantum-as-a-service (QaaS) is gaining traction from its integration with emerging technologies, which should allow businesses to utilize quantum computing resources remotely, further driving greater adoption of the technology.
Given this backdrop, we think quantum computing stocks Applied Materials, Inc. (AMAT), Analog Devices, Inc. (ADI), Ambarella, Inc. (AMBA), and IonQ, Inc. (IONQ) might be quality additions to one’s portfolio.
Applied Materials, Inc. (AMAT)
AMAT is a seller of manufacturing equipment, services, and software to the semiconductor and related industries. Santa Clara, Calif.-based company operates through Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets segments.
On October 18, AMAT unveiled its new eBeam metrology system for patterning control over logic and memory chips. The advanced system is expected to provide chipmakers with multidimensional data sets for speedily marketing new technologies and chips.
In September, the company introduced new technologies and an advanced packaging solution to speed up customers’ technology roadmaps, creating new growth opportunities for AMAT.
For its third fiscal quarter, ended August 1, AMAT’s net sales increased 41% year-over-year to $6.20 billion. Its non-GAAP adjusted operating income rose 74.9% from the prior-year quarter to $2.03 billion. Its non-GAAP adjusted net income, and non-GAAP adjusted EPS stood at $1.74 billion and $1.90, respectively, up 78.3% and 79.2% year-over-year.
A $6.86consensus EPS estimate for the current year (fiscal 2021) indicates a 64.5% improvement of 64.5% from the prior year. Likewise, the $23.28 billion consensus revenue estimate for the current year reflects a 35.4% year-over-year rise. Furthermore, AMAT has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 131.5% in price over the past year and 74% year-to-date to close yesterday’s trading session at $150.13.
Click here to checkout our Semiconductor Industry Report for 2021
Analog Devices, Inc. (ADI)
ADI designs, tests, and markets Integrated Circuits (ICs), software, and subsystems. The Norwood, Mass., company’s offerings include data converter products, high-performance amplifiers, radiofrequency, and microwave ICs.
On October 5, ADI declared that it had successfully placed its sustainability-linked bond offering of $750 million in seven-year notes. The company expects to use the proceeds of the offering to reinforce its commitment to the environment and transition toward a low-carbon future.
On September 22, the company announced that U.K.-based high-performance car builder Lotus Cars plans to implement ADI’s wireless battery management systems (wBMS) in its next-generation EV architecture. This development could prove to be profitable for the company.
In August, ADI acquired the semiconductor firm Maxim Integrated Products, Inc. (MXIM). The business combination should strengthen its position as a high-performance analog semiconductor company.
ADI’s revenue increased 20.8% year-over-year to $1.76 billion in its third fiscal quarter ended July 31. Adjusted gross margin improved 23.7% from the prior-year quarter to $1.26 billion, while its adjusted operating income rose 24.5% from the same period last year to $766.41 million, and it adjusted EPS climbed 26.5% year-over-year to $1.72.
Analysts expect its EPS to increase 30.8% year-over-year to $6.42 in the current year (fiscal 2021). Likewise, the Street’s revenue $7.28 billion estimate for the current year reflects a rise of 30% from the prior year. In addition, ADI has beaten consensus EPS estimates in each of the trailing four quarters.
ADI’s stock has gained 43.5% over the past year to close yesterday’s trading session at $180.73. It has gained 22.3% year-to-date.
Ambarella, Inc. (AMBA)
AMBA, in Santa Clara, Calif., develops semiconductor solutions for high-definition (HD) and ultra-HD compression image processing and network processing. The company’s solutions enable video-content creation for wearable and automotive cameras, drones, and virtual reality cameras.
On October 26, AMBA announced that it has entered a definitive agreement to acquire Ohio-based AI software algorithm firm Oculii Corporation. The acquisition is expected to expand the company’s addressable market and unlock more significant levels of perception accuracy.
In September, the company partnered with Dongfeng Fengshen (Aeolus), a Dongfeng Motor Company brand, to build a Driver Monitoring System (DMS). Regarding this partnership, Fermi Wang, CEO of Ambarella, said “This DMS safety system is the latest example of the practical, intelligent automotive technology solutions that Ambarella and Dongfeng Fengshen have cooperated on to achieve mass production.”
For its second fiscal quarter, ended July 31, AMBA’s revenue increased 58.6% year-over-year to $79.33 million. Its gross profit was up 59.6% from the same period last year to $49.42 million. Its non-GAAP net income and non-GAAP net income per share was $13.15 million and $0.35, respectively, registering increases of 529.7% and 483.3% year-over-year.
The Street’s $0.41 EPS estimate for the current quarter (ending January 2022) reflects a 192.9% year-over-year increase. Similarly, the Street’s $88.22 million revenue estimate for the current quarter indicates a 42% rise from the prior-year quarter. AMBA has topped the Street’s EPS estimates in each of the trailing four quarters.
AMBA’s stock has gained 234.3% over the past year and 113.7% year-to-date to close yesterday’s trading session at $196.19.
Click here to checkout our Semiconductor Industry Report for 2021
IonQ, Inc. (IONQ)
IONQ develops general-purpose quantum computing systems. The College Park, Md.-based company provides access to its quantum computers through several cloud platforms. It went public through a reverse merger with dMY Technology Group, Inc. III, on October 1, 2021.
On October 11, IONQ and researchers from The University of Maryland reported a significant breakthrough in error correction technology for quantum computers. The breakthrough is expected to enable the company to apply error correction when needed and minimize qubit cost.
On September 14, the company announced its collaboration with Accenture plc (ACN) to accelerate quantum computing business experimentation in organizations globally. Regarding this collaboration, IonQ CEO and chairman Peter Chapman said, “Accenture has a proven track record of implementing next-generation technologies and is deeply committed to delivering on the promise of quantum. We could not ask for a better partner to help us accelerate a quantum future that will change the world.”
IONQ’s revenue stood at $93,000for the three months ended June 30. For the six months ended June 30, its net cash provided by financing activities increased 35,846.7% year-over-year to $5.39 million.
The Street expects IONQ’s revenue to improve 148.2% from the current year to $14.57 million next year (fiscal 2022).
The stock has gained 78.6% in price since it went public on October 1 to close yesterday’s trading session at $16.43. It has gained 9.2% over the past five days.
AMAT shares were trading at $153.13 per share on Friday afternoon, up $3.00 (+2.00%). Year-to-date, AMAT has gained 78.41%, versus a 26.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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