Quantinuum Stock Fizzled in Its Debut, but Wall Street Calls It a Buy — Barrons.com

By Mackenzie Tatananni

Hype mounted in the quantum computing community ahead of Quantinuum's initial public offering, and while enthusiasm fizzled during its trading debut, analysts are now singing the company's praises.

That wave of optimism came as the post-IPO "quiet period" expired on Monday, lifting the regulatory ban that prevents underwriters from publishing research reports, ratings, or valuation targets on a stock.

Cantor Fitzgerald analyst Troy Jensen was among the bulls to initiate coverage on Quantinuum at Overweight. In an interview with Barron's last month, Jensen argued that the company could become a commercial leader if its signature trapped-ion modality proved to be the most viable technology.

Trapped ions, as the name suggests, are suspended in vacuums and manipulated by lasers. The modality generally lends itself to better fidelity, a measure of accuracy that gauges how closely a quantum operation matches its intended target.

With its latest Helios system, Quantinuum transitioned from industry-standard ytterbium to Barium-137 isotopes for its quantum bits, or qubits, the fundamental units of information in a quantum computer. This material switch allows the system to manipulate qubits using highly stable visible and infrared lasers rather than error-prone ultraviolet light.

As Jensen noted Monday, "Quantinuum envisions a hybrid compute world" comprised of CPUs, GPUs, and quantum processors, "with quantum computing as the foundational layer." This has influenced how the company has designed its systems, resulting in what is commonly referred to as a "full stack" — hardware, software, and applications.

This strategy is nothing new. Most quantum companies strive to do more than build hardware; some, like IonQ, have aimed to diversify beyond the core computing business into technologies like quantum sensing.

But Quantinuum is distinguished by its technical prowess, as Rosenblatt Securities analyst John McPeake noted. McPeake is even more optimistic: While Jensen has assigned a $90 price target on the shares, McPeake rates Quantinuum at Buy with a $155 price target, suggesting shares could more than double from current levels. Quantinuum was 2.5% lower at $73.72 on Monday.

McPeake noted that Quantinuum "has set the industry benchmarks in quantum compute," referring to its Helios platform achieving an industry-leading 99.92% two-qubit gate fidelity.

That technical edge is coupled with deep corporate roots, according to J.P. Morgan. In addition to having "one of the strongest balance sheets in the group" following its IPO, J.P. Morgan analyst Harlan Sur lauded the company's "heritage from Honeywell."

Quantinuum formed in 2021 through the merger of Honeywell International's quantum division and Cambridge Quantum, a U.K. start-up that spun out of the University of Cambridge in 2014.

Sur spotlighted the Quantinuum team's decade-plus of experience fine-tuning trapped-ion quantum systems, an effort that originated under Honeywell Quantum Solutions. Over the past six years, the company has launched three generations of quantum computers, with plans to scale to even larger systems by the end of the decade.

Crucially, the company's "commercial momentum is building," Sur continued. Quantinuum boasts a customer pipeline spanning industries like financial services, telecommunications, and automotive, only bolstered by a recent federal endorsement.

Last month, Quantinuum struck a tentative agreement with the Commerce Department, exchanging a minority equity stake in the business for federal funding.

Breaking from the widespread optimism, Morgan Stanley chose to remain on the sidelines, initiating coverage at Equal Weight. While Quantinuum's "differentiated technology and consistent execution" make it one to watch, the firm believes a neutral rating best balances its long-term upside potential against its commercialization and execution risk.

In the near term, Quantinuum expects proceeds from the IPO to fund its operations until the launch of Apollo, its fifth-generation system, sometime in 2029.

Jefferies analyst Kevin Garrigan — who initiated coverage on Monday with a Buy rating and a $90 price target — boldly labeled the company a "quantum leader," pointing to Apollo's debut as the industry's true "commercial tipping point."

For Quantinuum and its newly vocal backers, it seems the real countdown to that milestone has just begun.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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