IonQ (IONQ +0.06%) has been flying high in September. Analysts raised their price targets, it announced an acquisition of Vector Atomic, and it was named a partner for the Department of Energy's Quantum-in-Space collaboration. If you invested in IonQ a year ago, you'd be sitting on returns of 787% (as of Sept. 26).
Good news and a rapidly rising share price is often the recipe for a stock split. IonQ currently checks both of those boxes, so let's see if a stock split could be on the horizon.
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Why would IonQ split its stock?
A traditional stock split, also known as a forward split, is when a company increases its number of shares to reduce its share price. Companies normally start considering this when their share prices have gotten expensive, to the point where investors may not want to buy a stock. If a stock costs $1,000 or $2,000, some investors will avoid it because they can't afford a full share and don't want to invest in fractional shares (or don't use a broker offering that feature).
With a stock split, the company can divide its shares and its share price. In a 10-for-1 split, each share would become 10 shares, and the share price would be divided by 10. For example, a stock that costs $1,500 before the split would cost $150 after.
NYSE: IONQ
Key Data Points
Even after its recent success, IonQ is still trading for under $100. There's really no reason for a stock split at that price.
There is another type of stock split, called a reverse stock split, that works in the opposite fashion. A company consolidates shares to increase its share price. We can rule out a reverse split -- it's usually a move companies make when they're trading in the single digits and could potentially be delisted by their stock exchange.
What's behind IonQ's growth?
Of the four major pure-play quantum computing companies, IonQ is the largest and has made some impressive technological advances. On Sept. 25, it became the first company to record an algorithmic qubit score of #AQ 64, which it did three months ahead of schedule. #AQ benchmarks measure the ability to run quantum algorithms with high fidelity (accuracy). This recent milestone demonstrates that IonQ's quantum systems can now handle fairly complex real-world use cases.
This isn't the only instance of IonQ achieving a significant breakthrough in the quantum computing industry. Last year, it developed the first trapped ion system to surpass 99.9% fidelity on barium.
IonQ has also been on something of an acquisition spree this year. It has acquired Qubitekk, Lightsynq, and Oxford Ionics, and as mentioned above, it has announced its intention to acquire Vector Atomic. Buying other businesses is a way for IonQ to expand into new markets, grow its research and development (R&D), and add to its extensive portfolio of patents -- it currently licenses, owns, or controls over 1,000 patents.
IonQ has also been a popular quantum computing investment because it takes a unique approach compared to the competition. The more common method, superconducting, is faster, but it also requires keeping quantum systems at extremely low temperatures. IonQ uses trapped ions, which is more accurate and allows its quantum systems to operate at room temperature.
A stock split probably won't happen in the near future
The quantum computing industry is still in the early stages. IonQ has only been around 10 years, and it went public in 2021. Rapid growth isn't out of the question, especially if quantum computing meets lofty expectations as a transformative technology.
The downside is that you're largely investing in potential and not any proven results with quantum computing companies. On the financial side, IonQ has reported just $52 million in revenue and $464 million in net losses over the trailing 12 months (TTM). CEO Peter Chapman has said that he expects IonQ to reach profitability by 2030, which is still a long way off.
Considering IonQ's current share price, 2030 is also about the earliest I'd expect a stock split for IonQ, and even that's a long shot. As far as its value as an investment, IonQ is a high-risk, high-reward company. If quantum computing becomes profitable, and IonQ remains one of the major players, it could continue to outperform the market. But those are big ifs, and this company already trades at a high valuation. If you want to add it to your portfolio, the safest approach is to start small.
