A $10 Billion Reason to Buy This Quantum Computing Stock Now

Nvidia (NVDA) CEO Jensen Huang seems to do no wrong. Yet, he had to eat humble pie on this one. After stating that “very useful quantum computers” may still be 15 to 30 years away in January, Huang held the company's first-ever quantum day just a couple of months later, sounding ever-so-bullish about it.

And not just Nvidia, tech titans such as Microsoft (MSFT), Alphabet (GOOG) (GOOGL), and Amazon (AMZN), along with pure-play quantum computing names such as D-Wave (QBTS), Rigetti Computing (RGTI) and IonQ (IONQ) are making a beeline to gain a head start in the quantum computing race, widely touted to be the next battleground for big tech after artificial intelligence (AI).

But where does Honeywell (HON) fit into all this?

Founded as Honeywell Heating Specialty Company in 1906, Honeywell is a diversified technology and manufacturing conglomerate with four primary business segments. These are aerospace, Honeywell Building Technologies, Performance Material and Technologies, and Safety and Productivity Solutions.

Valued at a market cap of $141.5 billion, HON stock is down 2.1% on a year-to-date (YTD) basis, with the stock offering a dividend yield of 2.03%. This was higher than the sector average of 1.68%.

However, to answer the aforementioned question, Honeywell's trump card to make space for itself in the quantum computing industry lies with its subsidiary, Quantinuum.

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Born in 2021 from the merger of Honeywell Quantum Solutions and Cambridge Quantum Computing, Quantinuum designs and delivers advanced trapped-ion quantum computers and middleware, software, and applications across industries like cybersecurity, chemistry, finance, and AI. Headquartered in Cambridge, UK, with a U.S. base in Broomfield, Colorado, it now employs 450–550 staff, including over 300 scientists and engineers.

Quantinuum’s leadership includes CEO Rajeeb Hazra, formerly at Intel (INTC) and Micron (MU), and Chief Product Officer Ilyas Khan, founder of Cambridge Quantum.

After raising $300 million at a $5 billion valuation, headlined by J.P. Morgan (JPM) in February 2024, the company is now seeking to raise fresh capital at a proposed valuation of $10 billion, with Nvidia being tapped to become the marquee investor this time.

Having said that, what is driving such rapid valuation growth for Quantinuum?

In April 2024, Quantinuum’s H-Series trapped-ion platform achieved a quantum volume of 1,048,576, the highest publicly reported figure in the industry. This performance is supported by a two-qubit gate fidelity of 99.9%, a specification that greatly reduces computational errors and enables the execution of more complex algorithms with accuracy. The hardware is built on a Quantum Charge-Coupled Device architecture, which ensures that all qubits are directly connected. This design eliminates the need for performance-draining qubit swaps and allows circuits to be implemented more efficiently. In addition, the adoption of a two-dimensional grid layout lowers the number of control lines needed for each qubit, a feature that improves scalability for future systems.

Then, a joint effort with Microsoft has produced four logical qubits capable of running 14,000 operations in sequence without error. This result represents an 800-fold improvement in error suppression and is considered an important milestone toward achieving fault-tolerant quantum computing, a level of reliability that competing platforms have yet to demonstrate.

Beyond its hardware, Quantinuum operates a fully integrated quantum technology stack. Its software portfolio includes TKET, an open-source compiler designed for compatibility across different quantum machines.

There is InQuanto, which focuses on quantum chemistry applications, and Quantum Origin, a system for generating cryptographic keys with quantum-level security. This combined approach to hardware and software development enables closer integration and faster innovation than models where these functions are separated.

Honeywell's financials have been solid, and the company has consistently outperformed Street expectations, reporting nine consecutive quarters of earnings beats.

In the most recent quarter, Honeywell reported revenues of $10.4 billion. This marked a yearly growth of 8% as the company's earnings rose by 10.4% from the previous year to $2.75 per share. Other than the Industrial Automation segment, all other segments reported year-over-year (YoY) growth in revenue.

Although operating cash flows fell marginally from the prior year, they remained at a considerable $1.32 billion. Free cash flow generation exceeded $1 billion in the quarter, with the company closing the quarter with a cash balance of $10.35 billion. This was higher than its short-term debt levels of $6.34 billion.

Encouragingly, Honeywell also raised its full-year 2025 guidance for both revenue and earnings. The company has now guided net sales to be in the range of $40.8 billion to $41.3 billion, up from $39.6 billion to $40.5 billion earlier, while earnings are now expected to be between $10.45 and $10.65 per share, up from $10.20 to $10.50 previously.

Thus, analysts have attributed a rating of “Moderate Buy” for the stock, with a mean target price of $255.05. This denotes an upside potential of about 14.46% from current levels. Out of 24 analysts covering HON stock, 13 have a “Strong Buy” rating, and 11 have a “Hold” rating.

On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com