After Google’s parent company, Alphabet Nasdaq:GoogleAmazon announced a breakthrough in quantum computing using its Willow chip, and stocks related to quantum technology rose. Righetti Computing Nasdaq: RGTI Its value has increased several times in just one month. However, one company that has seen a less significant rise is Skywater Technology Nasdaq: Fire. Shares are up nearly 61% in the past month as of the Jan. 2 close.
The company’s business is more diversified than just quantum computing, which is why its value has not seen the same meteoric rise. However, the company generates much more revenue than Righetti. However, it is trading for a fraction of its value. This begs the question: Is Skywater a somewhat more valuable quantum computing stock at this point that could benefit in the long term?
Skywater: Working to develop next-generation semiconductors
SkyWater technology today
Skywater technology
As of 03/01/2025 at 05:45 PM ET
- 52 week range
- $5.63
▼
$19.00
- Price target
- $12.75
Skywater is a semiconductor manufacturer commonly referred to as a foundry. However, Skywater differentiates itself by focusing on developing future semiconductor technology. The company achieves its goals through unique financing to develop these technologies.
Skywater uses what it calls a customer-funded CapEx model. Through this model, clients provide upfront capital. It funds the development of its own customized semiconductor solutions. This allows Skywater and its customers to share the risk of developing innovative technologies that may not have commercially viable applications for some time. The company’s Advanced Technology Services (ATS) segment generates revenue through this joint development process.
After development, Skywater’s goal is to move on to actually manufacturing the product and selling it to its customers. Customers often help the company purchase the tools needed to produce these technologies. The company’s tools segment generates revenue from this. Once Skywater sells the developed products, revenues go to its wafer services segment. In the third quarter, AST, Tools and Wafer Services revenues accounted for 60%, 33% and 7% of total revenues, respectively. The company’s total revenue of $94 million was a 31% increase from the previous year. However, Wafer Services revenues declined 54% due to continued weakness in the industrial end market.
Skywater: High revenues and positive profits
Financially, Skywater is moving in the right direction. The company increased its adjusted gross profit margin By 190 basis points As of Q3 2023. Additionally, it slightly increased its adjusted earnings before tax, depreciation and amortization (EBITDA) margin to just under 12%. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) have been positive for nine straight quarters. It also had positive adjusted net income in the last two quarters. This is not expected to continue into the next quarter, as abnormally high instrument revenues have contributed to this. However, these are still positive developments.
SkyWater Technology, Inc. (SKYT) Price chart for Saturday, January 4, 2025
Quantum computing and the benefits of Skywater’s business model
In the company’s annual reporthe refers several times to his involvement in the field of quantum computing. I initially started working with D-Wave New York Stock Exchange: QBTS Back in 2013. Since then, it has expanded its customer base in this market. It now includes several companies developing technology for quantum computing and supercomputing. D-Wave specializes in quantum annealing for quantum computing. It also states that she has worked on photon-based quantum computing.
This is the place Partnership with PsiQuantum PsiQuantum plans to develop its own quantum computing chips at its Skywater factory in Bloomington, Minnesota. However, the optical quantum computing approach is different from the gate-based approach used in Google’s Willow chip. This shows that technology is not far away. However, this approach offers significant benefits over Google’s approach if it becomes viable. This includes the fact that the chips can operate at room temperature. Meanwhile, Google must keep its chips at absolute zero temperature. This introduces significant energy costs to maintain extremely low temperatures. However, some components of PsiQuantum systems still require cryogenic temperatures.
Skywater has extensive experience developing quantum computing technology using multiple approaches. This gives the company the ability to benefit in the long term as the technology develops. It also generates significant revenue and adjusted earnings. This may make it more stable than other quantum stocks, which barely generate revenue.
In addition, the developmental nature of the Company’s business may make its revenue sources less volatile than other foundries. For example, amid the slowdown in the chip industry excluding AI, Global Foundries Nasdaq: GFS Its revenue has seen a significant decline since 2023. Meanwhile, Skywater’s revenue is rising. The next-generation nature of the technologies Skywater is developing may mean customers are willing to keep paying, even in the event of a slowdown. Although it is not a pure quantum game, Skywater is an interesting work with a positive quantum aspect. The forward price-to-sales ratio is just over double, compared to 386x for Rigetti Computing.
Before you consider SkyWater technology, you’ll want to hear this.
MarketBeat tracks the highest-rated and best-performing research analysts on Wall Street and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market hits… and SkyWater Technology was not on the list.
While SkyWater Technology currently has a “buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
Just get into the stock market? These 10 simple stocks can help novice investors build long-term wealth without knowing options, techniques, or other advanced strategies.
