Quantum Computing Stocks, Key Themes, and Momentum Movers
Weekly Breakdown for the Week of November 25-29, 2024
Quantum Computing Stocks Take the Spotlight
Quantum technology stocks have experienced a significant surge in recent weeks, with dramatic gains for companies like Quantum Computing Inc. (QUBT), D-Wave Quantum (QBTS), IonQ (IONQ), and Rigetti Computing (RGTI).
This momentum has been driven by increased investor interest, partnerships with tech giants like NVDA, quantum investment pledges from AMZN, and advancements in quantum error correction.
NVIDIA’s CUDA-Q platform and collaborations with companies like Google Quantum AI and IonQ have spotlighted quantum’s potential, while breakthroughs such as Quantinuum’s topological qubit and Microsoft’s (MSFT) work on logical qubits underscore the sector’s technical progress.
Despite growing revenues in companies like IONQ, the industry is still in its infancy, with scalability and profitability remaining significant hurdles.
However, concerns temper the excitement, as financial instability, speculative trading, and potential misrepresentation plague the market.
Some firms, such as Quantum Corp., have been incorrectly associated with quantum technology, contributing to confusion and market volatility.
Additionally, pump-and-dump schemes raise skepticism about the legitimacy of certain stock movements. While the quantum sector boasts transformative potential, investors face substantial risks due to the speculative nature of the market and uncertain timelines for commercial viability.
Differentiating between genuine innovation and overhyped claims will be critical as the industry matures.
Unusual Machines Stock Gets Unusual Catalysts
Elon Musk’s criticism of the F-35 fighter jet has sparked significant market activity, impacting both established and emerging defense companies.
Musk, who posted on social media advocating for coordinated drone fleets over traditional jet fighters, caused Lockheed Martin’s shares to drop by nearly 4% early in the week.
Meanwhile, a small drone maker, Unusual Machines (UMAC), saw its stock skyrocket, gaining 326% for the week.
The surge was further fueled by the announcement that Donald Trump Jr. had joined the company as an advisor, emphasizing the importance of U.S.-made drone components and reducing reliance on Chinese imports.
Despite its newfound attention, Unusual Machines remains a small player with just $1.5M in quarterly sales but now boasts a market capitalization of $155M.
Musk’s comments highlight a broader debate about the future of military technology. Some experts defend the continued necessity of advanced jet fighters like the F-35 for their speed, range, and lethality.
The U.S. military is also heavily investing in drone technology, which has gained prominence but is unlikely to replace jets entirely in the near term.
While Musk has not elaborated further on his comments, his influence, combined with political backing for Unusual Machines, has brought significant attention to the company and the broader drone industry.
Symbotic Shares Fall Amid Filing Delay
Symbotic’s (SYM) stock plummeted nearly 40% after the company announced delays in filing its annual report due to "material weaknesses" in financial reporting controls and adjusted its sales guidance downward.
The company revealed errors in its fiscal fourth-quarter earnings report, including premature expensing of goods and services tied to unmet milestones and unbillable cost overruns in certain deployments.
These issues are expected to lower revenue, gross profit, and adjusted EBITDA for fiscal 2024 by $30M to $40M.
Symbotic also revised its fiscal first-quarter sales outlook to $480M–$500M, down from an earlier forecast of $495M–$515M.
Despite an impressive 300% stock surge in 2023, Symbotic's shares have fallen over 50% year-to-date, including Wednesday’s steep decline.
The company, which went public in 2022, provides robotics automation platforms for major retail clients like Walmart (WMT), a key investor.
The recent financial control issues and downward revisions raise concerns about Symbotic's ability to sustain its growth trajectory, even as it remains a prominent player in the retail automation sector.
Cassava Sciences Crashes After Failed Phase 3 Trial
Cassava Sciences (SAVA) experienced a catastrophic 85% drop in stock value after the failure of its Phase 3 trial for Alzheimer’s drug simufilam and a harsh critique from controversial investor Martin Shkreli.
The ReThink-ALZ trial revealed that simufilam failed to meet its co-primary endpoints, showing no significant improvement in cognitive or functional measures over a year. As a result, the company terminated its ReFocus-ALZ study and open-label extension trial.
CEO Rick Barry acknowledged the disappointment for patients and caregivers, while analysts criticized the lack of credible evidence supporting simufilam’s efficacy. The drug’s failure highlights the formidable challenges in Alzheimer’s drug development, where 98% of recent Phase 3 trials have failed.
Shkreli’s critique further damaged Cassava’s credibility. He cited flaws in simufilam’s pharmacokinetics, mechanism of action, and clinical trial design. He called the drug’s effects “random” and predicted the stock would drop to $2–$3 per share.
Cassava’s stock plunged from $30 to just over $5 as investors rushed to sell amidst short-selling activity. With $149M in cash reserves, the company faces an uncertain future, as its reliance on simufilam leaves its pipeline barren.
The debacle has ignited a firestorm of criticism on social media, reflecting both schadenfreude and sympathy for retail investors caught in the collapse.
Sector Weekly Performance
Current Themes & Volatile Movers
Headline Reactions
Impactful headlines caused sharp reactions in a number of stocks this week.
NRG up 10% after Jefferies upgraded the stock to a “Buy” and raised its price target to $113.
GM down 9% after Trump threatened 25% tariffs on Canada and Mexico over border concerns.
NNE down 22% after announcing a $60M private placement offering.
SRRK up 26% after rival Biohaven’s Taldefgrobep for spinal muscular atrophy failed its Phase 3 study.
ENPH up 8% after recently announcing the launch of its IQ PowerPack 1500 in the US and Canada.
RIVN up 13% after the company signaled the end of a four-year legal battle over alleged trade secrets theft.
RCAT up 26% after recently promoting Geoffrey Hitchcock to chief revenue officer.
HURA up 29% after recently announcing it expects to complete enrollment for REM-001 study in Q4, and the company also said it sees its cash runway into 2H25.
TSLA up 3% after it was announced that BCI trials will begin involving the Optimus bot.
Deal Flow Movers
Stocks announcing significant partnerships, contracts, and orders moved significantly this week.
ARWR up 24% after recently announcing it will get $825M in Sarepta (SRPT) licensing pact and the company appointed the Sarepta CEO to the board.
PSTX up 227% after announcing it will be acquired by Roche in a $1.5B deal, with stockholders receiving up to $13 per share cash.
RKLB up 5% after recently announcing a $23M award from the US Department of Commerce.
KODK up 7% after recently announcing its Retirement Income Plan Trust will sell some assets to Mastercard Foundation.
OKE down 4% after the company announced plans to acquire the remaining EnLink units in a $4.3B stock deal.
COP down 5% after the company announced a cash tender offer for debt securities and consent solicitations by Marathon Oil Corporation.
ZENA up 258% after recently announcing it signed Blue UAS, NDAA-compliant partner agreements for supply chain initiatives. Also, apparent short covering took the stock higher.
PDYN up 21% after recently partnering with RCAT to embed artificial intelligence into Teal drones.
GRFS down 13% after the company ended discussions with Brookfield Capital Partners regarding a potential acquisition.
Earnings Reactions
The third-quarter earnings season brought volatility to many individual stocks, with forward guidance being a significant driver of earnings reactions.
Up on Earnings
API up 33% after recently reporting its Q3 earnings results.
HSAI up 44% after reporting better-than-expected Q3 sales results.
Down on Earnings
WDAY down 6% after reporting its Q3 financial results and revising its FY25 revenue guidance. The company received several price target cuts.
ADSK down 8% after reporting its Q3 financial results.
HPQ down 11% after reporting financial results and issuing adjusted EPS guidance below estimates.
DELL down 12% after reporting worse-than-expected financial results.
FLNC down 19% after the company reported worse-than-expected Q4 sales results.
ZM down 6% after reporting Q3 financial results.
KSS down 17% after reporting worse-than-expected Q3 EPS and sales and reducing its FY24 guidance.
Other Volatile Stocks
SOUN up 18% on no specific news, however, substantial volume traded in the call options.
XP down 9% after it recently got a price target cut by Morgan Stanley.
Market & Economic News
Scott Bessent was nominated as Treasury Secretary. The 10-year bond yield fell 3% following the announcement.
Officials from Israel and Lebanon indicated that a ceasefire deal was reached.
The Trump administration threatened to impose a 25% tariff on all Canadian and Mexican imports if the two countries didn’t secure their borders.
The stock market was closed on 11/28/24 for the Thanksgiving holiday.
US Q3 GDP data came in at expectations at 2.8%.
FOMC minutes from the November 6-7 meeting revealed members favored gradual rate cuts if the economy progressed as expected, although there was general uncertainty around where the neutral rate should be.
New home sales for November dipped to 610K, falling short of forecasts.
Bitcoin fell to $90K, marking a nearly 10% correction from the recent all-time highs, before recovering later in the week when BTC futures touched $100K.
USD/YEN fell below 150 as the BOJ is expected to raise interest rates while the US Fed is expected to cut rates into year-end.
Upcoming Earnings
Monday 12/2/24
ZS, CRDO
Tuesday 12/3/24
BNS, CRM, CNM, OKTA, DCI, MRVL, REX, PSTG, BOX, CURV, BASE, DSGX, NOTV
Wednesday 12/4/24
CHWY, S, FL, AEO, DLTR, FIVE, SNPS, RY, THO, CHPT, CPB, PVH, CRBL, AVAV
Thursday 12/5/24
DG, LULU, TD, PATH, BBW, ULTA, CSIQ, DOCU, SIG, GTLB, BMO, HPE, MEI, IOT, CAL, VEEV, KR, WOOF, ASAN, CM
Friday 12/6/24
DOOO, GCO
Upcoming Economic Events & Data
Monday 12/2/24
ISM Manufacturing PMI
ISM Manufacturing Employment
Fed Waller Speech
Tuesday 12/3/24
Redbook
JOLTs Job Openings
JOLTs Job Quits
Wednesday 12/4/24
ISM Services PMI
Fed Chair Powell’s Speech
Thursday 12/5/24
Balance of Trade
Initial Jobless Claims
Continuing Jobless Claims
Friday 12/6/24
Non-Farm Payrolls
Unemployment Rate
Michigan Consumer Sentiment
This is one newsletter I look forward to every week to add to my deep dive. Thank you.