IonQ Stock Is a Promising-But-Risky Long-Term Bet

Stock Market

Quantum computing, a field that leverages the principles of quantum physics, has been steadily gaining traction over the years. Among the companies vying for dominance in this nascent industry, IonQ (NASDAQ:IONQ) stands out with its unique approach to quantum computing. Despite the compelling story painted by the company, however, investors should tread carefully with IONQ stock. There are significant risks involved in investing in such a young, high-growth company.

IonQ, headquartered in College Park, Maryland, is an American company that specializes in the development of general-purpose quantum computing systems. The company was founded in 2015 by two seasoned professors, Christopher Monroe and Jungsang Kim, who have been exploring trapped ion quantum computing for over 25 years.

IonQ’s approach to quantum computing involves manipulating individual atoms with lasers to create and control quantum bits or qubits, the basic units of quantum information. The company claims that its trapped ion approach offers several advantages over other quantum computing technologies, including high fidelity, scalability, networkability and algorithm optimization.

As a high-growth company still in the early stages of monetization, IonQ’s financial performance offers a mixed bag. Its revenues have grown significantly, with a compound annual growth rate (CAGR) of 68.2% forecast for 2023. However, the net margin remains negative, indicating that the company is not yet profitable.

Risks and Rewards With IonQ Now

Despite its current lack of profitability, IonQ has managed to secure impressive bookings for its quantum computing services. The company reported $4.1 million in new bookings for Q1 2023, putting it on track for over 100% growth in bookings compared to the previous year. This strong momentum has led IonQ to increase its 2023 bookings expectations by 25% to a range of $45 million to $55 million. These positive developments have been well-received by the market, with IONQ stock soaring.

A chart showing the price action in IonQ stock.

Source: Charts by TradingView

While IonQ presents an exciting investment opportunity, it’s essential to consider the risks associated with investing in such a young company. First, the quantum computing industry is still in its infancy, and it’s unclear when quantum computers will become commercially viable on a large scale. Second, IonQ faces stiff competition from other tech giants such as International Business Machines (NYSE:IBM), Google (NASDAQ:GOOG, NASDAQ:GOOGL) and Rigetti (NASDAQ:RGTI), all of which are also investing heavily in quantum computing research.

Moreover, IonQ’s financials paint a picture of a company that is still in the red. Its net margin remains negative, and it’s unclear when IonQ will become profitable. Investing in IONQ stock, therefore, requires a firm belief in the company’s long-term growth potential and a willingness to weather potential short-term volatility.

Lastly, IonQ’s valuation is a cause for concern. The stock’s high P/E multiple suggests that investors are paying a premium for the company’s growth potential. If IonQ fails to deliver on its growth expectations, the stock could experience a significant correction.

The Bottom Line on IONQ Stock

Bottom line? While IonQ’s progress in the field of quantum computing is commendable, the company’s investment case is not without its challenges. The quantum computing industry is still nascent, and IonQ’s path to profitability remains uncertain. Furthermore, its high valuation suggests that much of investors are already pricing in much of its future growth into IONQ stock.

Given these considerations, potential investors should approach IonQ with caution.

On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing.

Michael A. Gayed is the Publisher of The Lead-Lag Report, and Portfolio Manager at Tidal Financial Group, an investment management company specializing in ETF-focused research, investment strategies and services designed for financial advisors, RIAs, family offices and investment managers.

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