The quantum computing market is rapidly developing and trending globally. The field has significant potential to transform computing by offering faster and more efficient solutions. This has resulted in increased interest in companies and rising investments, opening new avenues for market development.
Given the industry's rosy prospects, it could be wise to consider high-potential quantum computing stocks Microsoft Corporation (MSFT), International Business Machines Corporation (IBM), and FormFactor, Inc. (FORM) for potential gains.
Quantum computing has been revolutionizing computing methods lately. This cutting-edge technology, which uses quantum mechanics to solve complex problems faster than classical computers, is rapidly developing, with more and more companies operating in the market emphasizing quantum error correction.
Also, diverse industries like healthcare and pharma, automotive & transportation, and financial services are actively adopting quantum computing for various applications.
The global quantum computing market is projected to grow to $12.62 billion by 2032, exhibiting growth at a noteworthy CAGR of 34.8%. Factors influencing the market growth include rising adoption across various industries, technological advancements, rapidly surging investments, and growing strategic partnerships and collaborations.
Further, according to McKinsey, as of December 2023, over $6.70 billion have been invested in the quantum computing space, and there were over 261 start-ups operating in the field. Also, it projects that by 2040, the estimated market size will reach between $45 billion and $131 billion.
Besides, public investments in the quantum market increased by over 50% from 2022. Various countries, led by Germany, the United Kingdom, and South Korea, announced significant new funding for QT development, bringing the global public funding total to date to about $42 billion, indicating fueling investment and interest in the segment.
Hence, amid this backdrop, it could be wise to invest in high-potential stocks offering suitable returns, and capital appreciation prospects. Given these encouraging trends, let's delve deeper into the fundamentals of high-potential stocks such as MSFT, IBM, and FORM.
Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices, and solutions globally. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing. It offers Office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft Viva, Microsoft 365 Copilot, and Office consumer services.
On September 29, MSFT and KT Corporation (KT) entered into a five-year multibillion-dollar partnership to propel KT's AI and ICT (AICT) transformation and accelerate the advancement of AI services and innovation in Korea. The companies will work on the development of Korean sovereign cloud solutions and market launches to drive cloud and AI innovation for the public sector and regulated industries.
The strategic partnership will drive AI transformation for over 650 thousand businesses and 17 million consumers across Korea.
On August 8, MSFT and Palantir Technologies Inc. (PLTR) expanded their partnership to deliver enhanced analytics and AI services to classified networks for critical national security operations. The companies collaborated to bring sophisticated and secure cloud, AI, and analytics capabilities to the U.S. Defense and Intelligence Community.
Palantir and MSFT have a long-standing alliance, and the new partnership will expand MSFT's capabilities and its reach in the defense sector. It will help accelerate the safe, secure, and responsible deployment of advanced AI capabilities for the US government.
MSFT's total revenues rose 15.2% year-over-year to $64.73 billion for the fourth quarter that ended June 30, 2024. The company's operating income grew 15.1% from the year-ago value to $27.92 billion. Also, its net income and EPS totaled $22.04 billion and $2.95, reflecting an increase of 9.7% from the prior year's quarter, respectively.
In addition, the company's total assets came in at $512.16 billion as of June 30, 2024, versus $411.98 billion as of June 30, 2023.
Street expects MSFT's revenue and EPS for the first quarter (ended September 2024) to increase 14.2% and 3.7% year-over-year to $64.52 billion and $3.10, respectively. Furthermore, it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of MSFT have surged 3.3% over the past month and 33.7% over the past year to close the last trading session at $430.30.
MSFT's robust growth prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability and Quality. Within the B-rated Software - Business industry, MSFT is ranked #22 out of 40 stocks.
Click here to access additional ratings of MSFT for Growth, Sentiment, Value, and Momentum.
International Business Machines Corporation (IBM)
IBM offers integrated solutions and services internationally. The company operates in Software; Consulting; Infrastructure; and Financing segments. The company offers a hybrid cloud and AI platform that enables clients to realize their digital and AI transformations across the applications, data, and environments in which they operate.
On September 23, IBM and NASA announced a new AI foundation model for a variety of weather and climate use cases, offering insights to the scientific, developer, and business communities. The model provides a flexible, scalable way to address a variety of challenges related to short-term weather and long-term climate projections.
On September 19, IBM and MSFT officially opened three new IBM-Microsoft Experience Zones within IBM's client innovation centers. The Experience Zones are designed to help global clients across industries find new ways to derive value from generative AI, hybrid cloud, and other Microsoft products and technologies.
Also, on September 9, IBM announced its intent to acquire Accelalpha, a global Oracle services provider. The strategic acquisition expands IBM's Oracle consulting expertise in supply chain and logistics, finance, enterprise performance management (EPM), and customer transformation.
For the second quarter that ended June 30, 2024, IBM's total revenue increased 1.9% year-over-year to $15.77 billion. Its non-GAAP gross profit grew 5.4% from the prior year's quarter to $9.12 billion. The company's non-GAAP income from continuing operations and EPS of $2.27 billion and $2.43 indicate growth of 13.6% and 11.5% year-over-year, respectively.
Furthermore, the company's adjusted EBITDA came in at $4 billion, up 8.1% from the from the prior-year quarter. Its free cash flow increased 24.3% from the year-ago value to $2.61 billion.
As per the full-year 2024 expectations, IBM continues to expect revenue growth consistent with its mid-single-digit model. And the company expects over $12 billion in free cash flow.
Analysts expect IBM's revenue and EPS for the third quarter (ended September 2024) to increase 2% and 1% year-over-year to $15.04 billion and $2.22, respectively. Also, the company has topped the consensus EPS estimates in all of the trailing four quarters.
IBM's shares have gained 16.5% over the past six months and 57% over the past year to close the last trading session at $221.08.
IBM's sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality. Within the Technology - Services industry, IBM is ranked #18 among 75 stocks.
In addition to the POWR Ratings we've stated above, we also have IBM ratings for Momentum, Value, Stability, Growth, and Sentiment. Get all IBM ratings here.
FormFactor, Inc. (FORM)
FORM designs manufactures, and sells probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to semiconductor companies and scientific institutions. The company operates through two segments: Probe Cards and Systems.
On February 28, FORM and Tabor Electronics LLC presented the Echo-5Q project, a demonstration of a full stack 5-Qubit Quantum Computer for research and education, leveraging a QPU supplied by QuantWare. The collaboration showed the ability of the partnering companies to support the quantum industry with their respective technologies.
During the second quarter, which ended June 29, 2024, FORM's revenues rose 26.7% year-over-year to $197.47 million. It reported a non-GAAP gross profit of $89.42 million, which is up 41.4% from the prior year's quarter. Also, the company’s non-GAAP operating income increased 155.6% from the year-ago value to $28.54 million.
Furthermore, the company's non-GAAP net income of $27.32 million and $0.35 per share reflects growth of 143.1% and 150% from the prior year's quarter, respectively.
For the third quarter, FORM provided the following outlook: It expects revenue of $200 million, +/- $5 million. It expected non-GAAP net income per share of $0.31, +/- $0.04.
Analysts expect FORM's EPS for the third quarter (ended September 2024) to increase 42.4% year-over-year to $0.31, and its revenue is estimated to grow 16.7% year-over-year to $200.29 million for the same quarter. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters.
FORM's stock has soared 36.5% over the past year to close the last trading session at $46.
FORM's POWR Ratings reflect its robust outlook. FORM has an A grade for Growth. It also has a B grade for Quality. It is ranked #15 among the 91 stocks in the Semiconductor & Wireless Chip industry.
Click here to access additional FORM ratings for Value, Sentiment, Momentum, and Stability.
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MSFT shares were trading at $423.44 per share on Tuesday afternoon, down $6.86 (-1.59%). Year-to-date, MSFT has gained 13.22%, versus a 21.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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