IonQ (IONQ 5.92%) has established itself as a leader in quantum computing, a cutting-edge technology poised to transform machine learning and artificial intelligence (AI). Recent breakthroughs are beginning to address an expanding scope of real-world commercial applications. Strong company sales have powered a fantastic rise in its share price, up 136% in the past year.
That being said, the stock has recently come under pressure amid renewed concerns in the market about whether the buzz surrounding quantum computing as an investing theme has gotten ahead of itself. At the time of writing, shares of IonQ are down 48% from their recent 52-week high, reflecting its still-speculative nature with significant volatility.
Does the sell-off offer investors a good chance to buy the stock ahead of a rebound? Here's what you need to know.
The quantum computing future of technology
Quantum computers are intended to tackle highly complex problems more effectively than even the most advanced supercomputers. While you won't need one anytime soon to play video games, quantum architecture is critical in areas like optimization, simulations, and cryptography. These application requirements can exceed the limits of classical computers based on binary logic.
IonQ's strategy is to continuously develop more powerful and sophisticated quantum computers, building on its current IonQ Forte and Tempo systems, which are designed to integrate into standard data center infrastructure. While customers can purchase a system directly, the company offers access to its hardware through cloud service providers like Amazon as a cost-effective option to deploy quantum capabilities.
Image source: Getty Images.
IonQ reached several milestones last year, including the construction of a manufacturing facility and the delivery of a Forte system to an enterprise customer. These achievements alongside major public and private sector contract awards have helped reaffirm a roadmap to capture an estimated $65 billion addressable market by 2030.
In 2024's third quarter, IonQ posted $12.4 million in revenue, representing an impressive 102% year-over-year increase. For the full year, the company expects to recognize between $75 million and $95 million in total bookings based on accelerating demand.
According to Wall Street analysts, the growth runway is expected to continue in 2025 with an estimated growth rate of 100% compared to 2024. While the company is unprofitable, with an earnings per share (EPS) loss projected to widen in 2025 amid intense spending needs, the market can often overlook near-term earnings weakness when a company is delivering this level of top-line momentum.
| Metric | 2024 Estimate | 2025 Estimate |
|---|---|---|
| Revenue (in millions) | $41.6 | $83.5 |
| Revenue growth (YOY) | 88.9% | 100.4% |
| Earnings per share (EPS) | ($0.43) | ($0.49) |
| EPS growth (YOY) | N/A | N/A |
Data source: Yahoo Finance. YOY = year over year.
Room to temper expectations
Before getting caught up in the excitement over quantum computers and buying IonQ stock, it's important to take a critical look at its current positioning.
One challenge is the intensively competitive landscape, as multiple companies are offering quantum alternative solutions, including technology sector leaders such as International Business Machines. Even among pure-play quantum computing peers like Rigetti Computing and D-Wave Quantum, it's unclear if IonQ's platform can maintain a long-term technological edge.
There are also questions regarding the actual size of the market opportunity. Recent headline-making comments from Nvidia CEO Jensen Huang (often referred to as the godfather of AI) at an investor event suggested that quantum computers might be 15 to 30 years away from becoming very useful. The skepticism stems from a line of thinking that, outside of some very specific use cases for the technology, current high-performance computers -- including those powered by Nvidia GPUs -- are sufficient to address the vast majority of commercial applications.
There's nothing wrong with a high-growth niche product, but it's more difficult to justify IonQ's current market cap of above $6 billion, with shares trading at an eye-watering 73 times its consensus 2025 revenue as a forward price-to-sales (P/S) ratio. It appears IonQ is being priced by the market aggressively based on some assumptions into the next decade, which is far from certain and highlights a risk investors must balance.
IONQ PS Ratio (Forward) data by YCharts
Decision time: I'm on the sidelines
The prudent move for investors is to avoid shares of IonQ right now, as I predict the stock will remain volatile amid numerous uncertainties and a pricey valuation. While quantum computing may indeed be the future of technology, I believe that at present, there are better opportunities in the stock market elsewhere.
