IonQ (IONQ 2.15%) has been a divisive stock ever since it went public by merging with a special purpose acquisition company (SPAC) last October. The bulls claimed the quantum computing company had plenty of room to grow, while the bears argued that its roadmap was speculative, it was deeply unprofitable, and its stock was too pricey.
As a result, IonQ's stock opened at $10.60 on its first trading day, skyrocketed to $31 a month later, then sank to an all-time low of $3.04 by December. But after those wild swings, the stock more than quadrupled to its current price of nearly $13.
Image source: Getty Images.
The bulls rushed back to IonQ because it was rapidly growing its computing power, gaining new contracts, and seemed well positioned to profit from the expansion of the artificial intelligence (AI) market. The miniaturization of its quantum processing units (QPUs) with its "trapped ion" technology -- which doesn't require massive refrigeration systems because it functions at room temperatures -- could also disrupt its competitors by shrinking the systems from several feet to just a few inches.
But instead of focusing on those well-known facts, which I already covered in another recent article, let's dig into four other things about IonQ that smart investors should know.
NYSE: IONQ
Key Data Points
1. IonQ's short sellers are still skeptical
Last May, Scorpion Capital published a scathing report alleging that IonQ grossly exaggerated its miniaturization capabilities and computing power.
In its SPAC presentation, IonQ claimed to have developed a "32 qubit quantum computer" that was the world's "most powerful quantum computer" and "32,000 times" more powerful than other competing systems.
However, Scorpion claimed that the 32-qubit system didn't actually exist and that IonQ's most powerful system was an 11-qubit system that couldn't even "properly add 1+1." Scorpion also said IonQ didn't actually own any "meaningful intellectual property" and was actually running its services on third-party QPUs from Honeywell.
We should take those accusations with a grain of salt since Scorpion was shorting IonQ's stock at the time, but they were serious enough to trigger a class-action lawsuit against the company. More than a fifth of IonQ's shares were still being shorted as of Oct. 30 -- so there are still a lot of skeptical bears waiting for the other shoe to drop.
2. IonQ just lost its co-founder and chief scientist
To make matters worse, Chris Monroe, IonQ's co-founder and chief scientist, abruptly left the company in late October to resume a research position at Duke University. That departure raised a bright red flag because Monroe developed the trapped ion technology that IonQ's entire strategy of miniaturization was based on.
Jungsang Kim, IonQ's other co-founder, remains the company's CTO, but his primary expertise is the miniaturization and scaling of quantum computing systems. In other words, Monroe and Kim needed to work together to use trapped ions to create smaller QPUs. That's why IonQ's stock immediately lost more than a fifth of its value after Monroe's departure.
3. IonQ is falling behind its own SPAC estimates
Like many other SPAC-backed tech companies, IonQ set some ambitious growth targets during its pre-merger presentation. But as the following table illustrates, it broadly missed its own expectations over the past three years.
|
Metric |
2021 |
2022 |
2023 |
|---|---|---|---|
|
Revenue (SPAC estimate) |
$5 million |
$15 million |
$34 million |
|
Revenue (actual + current estimates) |
$3 million |
$11 million |
$21 million-$22 million* |
Data source: IonQ. *Company's latest expectations.
Therefore, we shouldn't put too much faith in IonQ's original plan to generate $237 million in revenue in 2025. For now, analysts expect it to generate $88 million in revenue in 2025 -- which would still mark a compound annual growth rate of 100% from 2023 -- but a lot of that growth is already baked into its stock at over 100 times this year's sales.
On the bright side, IonQ's total quantum computing power -- as measured in algorithmic qubits (AQs) -- is expanding at a faster-than-expected rate. It reached its pre-merger target of AQ 29 in the first quarter of 2023, and it believes it can reach its next milestones of AQ 35 in 2024 and AQ 64 in 2025. That growing quantum computational power might convince the bulls its miniaturization efforts are still on track.
4. IonQ's insiders are still net buyers
IonQ will likely remain a polarizing stock for the bulls and bears. Nevertheless, IonQ's insiders still bought more than 50% as many shares as they sold over the past 12 months -- which suggests it has room to grow in the nascent quantum computing market. They also haven't bought or sold a single share over the past three months.
IonQ is still an expensive and speculative stock
IonQ is still a very risky stock to hold in this turbulent market. But as the only publicly traded "pure play" on the quantum computing market, it could have a lot of upside potential if it successfully scales up its business. And with an enterprise value of $2.4 billion, IonQ might still become a tempting takeover target if it proves the bears wrong.
