Quantum computing company Quantinuum to be valued at $37 billion, analysts predict

Last week, investment research firm Vertical Research Partners gave Honeywell (NASDAQ: HON) a buy rating in its latest research report because of their bullishness on Quantinuum, the quantum computing company that Honeywell holds.

Quantinuum's discounted equity value could reach about $37 billion within a decade, according to assumptions and projections reported by Vertical Research Partners. Honeywell currently holds a 54 percent stake, which implies a value of about $29 per share held by Honeywell, the analysts added, a figure equivalent to about 15 percent of Honeywell's total equity.

But analysts also said that any valuation of Quantinuum is currently speculative and that the company needs to grow according to its projections while avoiding pressure from competing companies. The assumptions are based in part on comments made by Honeywell at the company's recent investor conference and modeled on the post-IPO growth of companies such as Google, Apple and Microsoft.

The analysts also drew attention to Quantinuum's steady technological progress, noting that their H1-2 computer has a quantum volume of 4096 and that the total number of bits on their H1-1 computer increased from 12 to 20 in June. the company also recently released news of its error correction progress.

Jeffrey T. Sprague, who authored the report, is the managing partner of Vertical Research Partner and a veteran financial analyst who has followed Honeywell for decades.

01The $1 trillion use case

The valuations are exciting, but the projections are based on a potential market - worth trillions of dollars, spread across multiple industries.

Honeywell projects that quantum use cases will create $1 trillion in value by 2050, with Quantinuum entering more than half ($550 billion) of the potential market, including

Fertilizer production - $200 billion

Pharmaceutical and healthcare - $110 billion

New materials design - $170 billion

Analysts also see Quantinuum's cybersecurity division as providing a significant revenue-generating service.

According to this report, the value of quantum computing hinges on the premise that if quantum can save the pharmaceutical industry a small percentage of its costs, the resulting returns will be significant. For example, if Pfizer could use quantum computers to reduce R&D costs by 1 percent, that would save about $7.5 million, according to the analysts.

Extending this to all companies in the three industries would explain the high revenue potential," the report notes. Honeywell highlights cybersecurity as an early adopter, as Quantinuum has already entered the vertical market with its current service offerings. Honeywell expects Quantinuum's technology to transform these and other industries, including finance, energy, automation and transportation, in the mid- to late-20s of the 21st century. By 2030, Honeywell expects their products and technology itself to transform every vertical industry."

02IPO?

Vertical Research Partners offers some thoughts on exit strategies for Quantinuum investments, including initial public offerings (IPOs) or spin-off opportunities.

Honeywell will apparently monetize its assets, but the timing is unclear, the analysts said. Future monetization opportunities could arise if Quantinuum successfully addresses the markets mentioned above to secure a larger revenue base, the analysts said.

03Three Stages

Quantinuum's business model is divided into three phases: Penetration, Incubation and Expansion. The market penetration phase has been completed.

The report states, "The market penetration phase involves integrating their hardware with cloud providers such as Microsoft Azure and releasing services to increase initial adoption. For example, Quantum Origin currently offers encryption services that are random or unbreakable with current technology. They have established a partnership with PureVPN to generate encryption keys for users."

The current phase, incubation, will include additional partnerships with Fortune 500 companies. quantinuum has announced partnerships with Samsung, Nippon Steel and BMW to solve problems in materials science, supply chain and logistics optimization. It has also partnered with several companies, including JSR Corporation, to use the quantum software platform InQuanto for quantum chemistry research.

Rei Sakuma, principal investigator of JSR's Materials Informatics Initiative, said in a recent statement, "JSR has had a close working relationship with Quantinum for a long time. We are involved in beta testing InQuanto, primarily for new material development and performance prediction. InQuanto is very easy to use, even for researchers and engineers who do not have in-depth knowledge of quantum computing. In the future, we hope to be able to use InQuanto not only in R&D but also in real production sites as we further improve the performance of our quantum computers."

Vertical Research Partners expects to enter an expansion phase from 2024 to 2027 - Quantinuum will offer a broader Software-as-a-Service (SaaS) model, "integrating their products with other hardware and make their products available to a broader public consumer base."

Reference links：

[1]https://thequantuminsider.com/2022/09/07/analysts-report-suggests-quantinuums-potential-valuation-could-reach-37-billion/

[2]https://www.verticalresearchpartners.com/deepdives_byvertical.cfm?capid=5