QMCO Stock Skyrockets 458% in 3 Months: Will the Uptrend Continue?

Quantum Corporation QMCO stock has proved resilient amid a volatile market environment with a 457.8% surge in the past three months, outperforming its industry's decline of 9.8%. Headquartered in San Jose, CA, QMCO is a leading provider of end-to-end data management solutions tailored for the artificial intelligence (AI) era. It offers solutions for capturing, sharing and preserving digital assets over the entire data lifecycle. It caters to leading organizations in life sciences, government, media and entertainment, research and industrial technology verticals.

It has also outperformed the Zacks Computer and Technology sector’s growth of 0.9% and the S&P 500 composite’s jump of 3.8%. The stock has risen 258.4% in the past six months.

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Let us evaluate the pros and cons of QMCO and decide the best course of action for your portfolio.

QMCO's Myriad & ActiveScale: A Key Catalyst

QMCO’s Myriad and ActiveScale products continue to witness healthy demand trends. In December 2024, Quantum extended support for the NVIDIA GPUDirect Storage capability by introducing an advanced parallel file system client for its Myriad all-flash file system. The innovation also offers on-the-fly deployment of client nodes across diverse platforms, including support for NVIDIA Grace Hopper with Grace ARM-based architectures. The new client enables seamless integration of powerful GPU nodes into Myriad clusters, tailored for demanding workloads such as AI/machine learning (ML) model training, high-performance computing (HPC) visualization and video rendering. Following the Myriad parallel client announcement, QMCO’s stock skyrocketed more than 150% on Dec. 18, 2024.

Management remains focused on key growth areas like Myriad and ActiveScale, with strong pipeline growth experienced in the last reported quarter. QMCO stated that recently, a customer seeking high-speed primary and secure long-term storage chose Myriad and ActiveScale Cold Storage through a Quantum Go subscription. Although Quantum’s efforts are yet to reach the desired outcomes, the company is witnessing encouraging progress through product launches, including growing momentum with Myriad, along with improvements in operational efficiency.

In October 2024, QMCO’s flagship ActiveScale platform expanded its Veeam Ready qualifications. Veeam Software supports Quantum's ActiveScale 7.0, which includes all-flash solutions for rapid ransomware recovery and reportedActiveScale Cold Storage for budget-friendly, air-gapped retention in the Veeam Archive Tier.

Quantum revised its fiscal 2025 outlook for revenues of $280 million, with a variance of ±$5 million, and an adjusted EBITDA of $3 million, with a variance of ±$2 million. Although QMCO’s revenues are projected to be lower year over year at the current guidance midpoint, the operational measures implemented have resulted in an almost $10 million improvement in adjusted EBITDA compared to the prior year. Additionally, the company has largely completed its operational and infrastructure enhancements in the first half of fiscal 2025.

QMCO's Advances in Cyber Resiliency & AI Show Promise

Quantum’s continuous efforts to elevate cyber resiliency for modern enterprises through fresh launches and collaborations bode well. In December 2024, Quantum launched the Scalar i7 RAPTOR, an advanced tape storage solution optimized for AI and cloud applications. It is the most scalable and dense tape system designed for hyperscale customers, MSPs and large enterprises. Offering cost efficiency, sustainability and security, the Scalar i7 RAPTOR supports data lakes, protection and private or hybrid cloud deployments.

In November 2024, Quantum unveiled its latest innovation — the DXi9200 — to address threats associated with rapidly evolving cyberattacks, including ransomware. Being the newest addition to the successful DXi9000 Series, this hybrid data protection appliance is tailored for scalability, security and efficiency in backup and recovery solutions, with advanced capabilities to protect and empower enterprises. Following the announcement, the stock saw a massive surge.
Furthermore, the DXi9200 protects against data corruption and alteration through immutable snapshots, RAID parity protection and frequent integrity health checks. It works seamlessly with premium malware detection and backup software like Veeam, Veritas and Commvault.

QMCO’s Technical Indicators & Valuation

Quantum presents a compelling investment opportunity with its attractive forward 12-month price-to-sales ratio of 0.54, lower than the industry average of 1.35 in the past year.

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Technical indicators also support QMCO’s strong performance. The stock is trading above its 50 and 100-day moving averages, indicating upward momentum and price stability. This technical strength indicates positive market perception and confidence in its growth prospects.

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QMCO Faces a Few Challenges

Continued slowdown across the Product segment has affected QMCO’s overall performance. In the last reported quarter, its revenues declined 6.9% year over year to $70.5 million due to a decrease in revenues from primary storage. Supply chain woes remain an overhang on its performance.

Quantum is grappling with a substantial debt load while depleting its cash reserves at a rapid pace. As of Sept. 30, 2024, the company's cash, cash equivalents and restricted cash had declined to $17 million from $25.8 million on Sept. 30, 2023. As of Sept. 30, 2024, the outstanding term loan debt, excluding debt issuance costs, was $104.7 million, up from $87.9 million a year ago. Additionally, as of Sept. 30, 2024, outstanding borrowings on the revolving credit facility amounted to $28.3 million compared with $21.5 million as of Sept. 30, 2023.

For the second quarter fiscal 2025, the total interest expense amounted to $6.1 million, marking an increase from $3.9 million during the same period last year.

Over the past month, Quantum has struggled to sustain its upward momentum, with shares plummeting nearly 52% despite positive announcements and developments. This plunge underscores the volatility and investor uncertainty surrounding the stock, raising concerns about the company's ability to capitalize on recent launches and collaborations in the face of market pressures.

How Should Investors Play QMCO Stock?

With a Zacks Rank #3 (Hold), QMCO appears to be treading in the middle of the road. QMCO’s Myriad and ActiveScale products continue to experience strong demand. The company’s innovative product launches, strategic partnerships and progress in AI are significant growth opportunities. However, softness in Product segment and ongoing supply chain challenges remain hurdles to its overall performance. High debt burden also raises concerns.

Stocks to Consider

Some better-ranked stocks from the broader technology space are BlackBerry Limited BB, InterDigital, Inc. IDCC and Intrusion Inc. INTZ. BB presently sports a Zacks Rank #1 (Strong Buy), whereas IDCC & INTZ carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackBerry’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 131.25%. In the last reported quarter, BB delivered an earnings surprise of 200%. Its shares have surged 69.3% in the past six months.

The Zacks Consensus Estimate for InterDigital’s 2024 earnings per share is pegged at $15.19, unchanged in the past 30 days. IDCC earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 163.7%. The company’s long-term earnings growth rate is 15%. Its shares have jumped 46.7% in the past six months.

INTZ’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 43.06%. In the last reported quarter, Intrusion delivered an earnings surprise of 16.67%. Its shares have surged 52.6% in the past six months.

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