Shares of IonQ (IONQ -3.71%) fell 35.2% in October 2023, according to data from S&P Global Market Intelligence. Mostly, the quantum computing expert's volatile stock simply floated higher and lower based on the broader market's day-by-day tendencies. But one potentially game-changing executive departure caused the largest slump of the month.
The main reason behind IonQ's October crash
On Oct. 23, IonQ announced that co-founder and chief science officer Chris Monroe is leaving the company. Monroe is going back to the academic world, conducting research on quantum computing and teaching engineering students at Duke University.
Losing a technology researcher and company icon of that magnitude looks like a potentially game-changing misadventure for IonQ, and investors certainly saw the announcement in a bleak light. The share price fell 12.9% the next day and a total of 25% over the following week.
IonQ's entangled future
As scary as that sudden departure might be, this isn't the end of the world for IonQ and its investors. The stock has still more than tripled in 2023 in spite of minuscule revenue and deeply negative earnings.
Monroe leaves some big shoes to fill, but IonQ's C-suite is already packed with quantum computing and technology luminaries. The company isn't in desperate need of new technical expertise.
Among the 10 leaders listed in the company's executive team, at least three have doctorates and have published research in IonQ's exact field of expertise. Jungsang Kim, chief technology officer and another IonQ co-founder, has served on Duke's engineering faculty since 2004, so he'll still rub shoulders with his old friend and collaborator. If Monroe's expertise is needed in the future, I'm sure IonQ can set up a consulting relationship with him.
That being said, the stock was set up for a sharp price correction. Even now, IonQ shares trade at a nosebleed-inducing 138 times trailing sales, and the business is not profitable in any meaningful way.
This small-cap research company is blazing entirely new routes through the uncharted waters of quantum computing. It's a promising field that could eventually change computing as we know it, but IonQ hasn't built a profitable business around it yet. Sales are growing but still tiny, and it's not cheap to run a world-class research facility.
The lofty price-to-sales ratio indicates that many investors are willing to bet on IonQ's long-term prospects, shrugging off the cash-burning and unpredictable nature of its current operations. This stock might make sense in a speculative corner of your portfolio, with an investment small enough that you could afford to lose it all in a worst-case scenario. It's not a strategy for every investor, and you should assess your appetite for market risk before making that leap.