IonQ (IONQ +20.16%) has been a volatile and divisive stock ever since its public debut. The provider of quantum computing services went public by merging with a special purpose acquisition company (SPAC) on Oct. 1, 2021, and its stock started trading at $10.60 before nearly tripling to a record high of $31 on Nov. 17, 2021.
But today, IonQ's stock trades at about $8. It lost its luster as it missed its own pre-merger estimates, its co-founder and chief scientist Chris Monroe stepped down, and rising interest rates popped its bubbly valuations. Could this out-of-favor tech stock bounce back and mint some new millionaires over the next decade?
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What does IonQ do?
Traditional computers process data as binary "bits" of zeros and ones, while quantum computers can process zeros and ones simultaneously as "qubits." That approach makes quantum computers much faster than traditional computers, but they're also larger, pricier, and more prone to making mistakes while processing large amounts of data.
IonQ aims to address those issues with its "trapped ion" technology, which shrinks the average width of a qubit processing unit (QPU) system from a few feet to a few inches. It believes that miniaturization process will make it easier to scale quantum computing systems, reduce their costs, and improve their accuracy.
NYSE: IONQ
Key Data Points
As IonQ develops that miniaturization technology, it's providing its own quantum computer power as a cloud-based service to the U.S. military and large enterprise customers. It gauges its total quantum computing power in algorithm qubits (AQ), and it hit AQ 29 in 2023, AQ 36 this January, and it plans to reach AQ 64 by 2025.
At AQ 64, IonQ claims its platform would be "100,000 times larger than the limit of a classical supercomputer simulation." It also reiterated its goals of AQ 256 in 2026, AQ 384 in 2027, and AQ 1,024 in 2028 in its latest investor presentation.
Why did IonQ disappoint the bulls?
That growth trajectory sounds incredible, but IonQ missed its own revenue forecasts. Prior to going public, IonQ claimed its revenue would reach $5 million in 2021, $15 million in 2022, and $34 million in 2023.
But in reality, IonQ's revenue only reached $2 million in 2021, $11 million in 2022, and $22 million in 2023. It expects to generate $37 million to $41 million in revenue in 2024.
In 2022, the prolific short-seller Scorpion Capital accused IonQ of exaggerating its miniaturization capabilities and discretely using Honeywell's quantum computers to handle its cloud-based processing services. A few months later, Chris Monroe -- who had developed the trapped ion technology IonQ's entire business strategy was built upon -- abruptly resigned. Those setbacks drove some of IonQ's investors to file a class action lawsuit against the company. IonQ won the case last October, but it still faces tough questions about its future growth.
IonQ is still deeply unprofitable, and its stock looks expensive at 45 times this year's sales. But looking further ahead, analysts expect its revenue to grow at a stunning compound annual growth rate (CAGR) of 91% from 2023 to 2026.
Could IonQ be a millionaire-maker stock?
If IonQ matches those expectations, it could generate $153 million in revenue by 2026. Assuming it still trades at 45 times forward sales, its stock could more than quadruple and propel its market cap to $6.9 billion by the beginning of 2026.
If it continues to grow at a CAGR of 30% from 2026 to 2034, it could generate $1.1 billion in revenue by the final year. If it's trading at a more reasonable 20 times sales by then, it would be worth $22 billion -- which would represent a nearly 1,200% gain from its current price. That gain could turn a $77,000 investment into $1 million in 10 years.
That growth trajectory is feasible -- since Acumen Research and Consulting expects the quantum computing market to grow at a CAGR of 36% from 2023 to 2032 -- but IonQ needs to prove its business model is sustainable over the next few years. It also needs to withstand intense competition from tech giants like IBM and Alphabet's Google in the evolving quantum computing market.
IonQ has a narrow but viable path toward generating millionaire-making gains, but it's still a highly speculative stock. Investors should realize its stock could be easily cut in half in this unpredictable market before it heads much higher.
