Where Will IonQ Stock Be in 10 Years?

IonQ (IONQ -1.43%) has been a divisive stock ever since its public debut in October 2021. The bulls were dazzled by the quantum computing company's growing list of contracts and bold claims of miniaturizing quantum processing units (QPUs), but the bears were skeptical about its ambitious growth plans.

IonQ's stock opened at $10.60 on the first day after it went public by merging with a special purpose acquisition company (SPAC). It soared as high as $31 a month later, but it dropped to about $3 by December 2022. But today, it trades at about $41 -- so investors who scooped it up at its all-time low have netted some big gains in just two years. Can IonQ maintain that momentum and become a massive quantum computing leader over the next decade?

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Why is IonQ a divisive stock?

To understand why IonQ is such a divisive stock, we should first understand how quantum computing works. Traditional computers still store zeros and ones as binary bits of data, but quantum computers can store zeros and ones simultaneously in quantum bits (qubits). As a result, quantum computers can process massive amounts of data at a much faster rate than traditional binary computers. However, quantum computers are also much larger, more expensive, and make more computing errors -- so they're still mainly used by large government agencies and research institutions for niche tasks.

IonQ sells three main quantum computers: its top-tier Aria system, its commercial Forte system, and its on-premise Forte Enterprise system. It also provides its own quantum computing power as a cloud-based service. It sells these systems to the U.S. Air Force Research Lab, other government agencies, and major universities.

IonQ generates steady revenue from those customers, but it got a lot of buzz by claiming it could shrink the width of existing QPUs from a few feet to a few inches with its proprietary "trapped ion" technology. It claimed that process would support the production of smaller, cheaper, and less error-prone quantum computers. But like many SPAC-backed start-ups, IonQ overpromised and underdelivered. Here's how broadly it missed its own growth expectations from 2021 to 2023.

Data source: IonQ.

As IonQ missed its own pre-merger estimates, rising interest rates highlighted its losses and crushed its valuations. It also suffered a major setback in late 2023 when its co-founder and Chief Science Officer Chris Monroe, who had pioneered its entire "trapped ion" process, abruptly stepped down to return to "academic, research and policy pursuits."

At the same time, other quantum computing companies criticized IonQ's usage of its proprietary algorithmic qubits (AQs) to gauge its processing power. Its rival Quantinuum even calls AQ a "deeply flawed" metric that masks major error mitigation problems. Nvidia's CEO Jensen Huang also recently torpedoed IonQ's stock and the broader quantum computing sector by claiming it could take decades for "useful" quantum computers to actually hit the market.

Could IonQ shake off the bears?

Yet despite those concerns, IonQ expects its revenue to grow 75%-93% in 2024. This year, it plans to roll out its new Tempo quantum system, which it claims will be even faster and more accurate than its predecessors.

In terms of its total quantum computing power, IonQ reached 36 AQ at the beginning of 2024. But it expects that proprietary metric to soar to 64 AQ in 2025, 256 AQ in 2026, 384 AQ in 2027, and 1,024 AQ in 2028. It also expects its gate fidelity (error detection rate) to improve from 99.9% in 2024 to 99.95% in 2028 as it rolls out newer systems.

From 2023 to 2026, analysts expect IonQ's revenue to soar at a compound annual growth rate (CAGR) of 89% from $22 million to $148 million. But with an enterprise value of $8.8 billion, it already trades at 59 times its projected sales for 2026. With that much growth already baked in, IonQ's stock could quickly crumble if it falls short of Wall Street's estimates. It also isn't expected to turn a profit anytime soon, and it should burn its cash even more quickly as its ramps up its R&D spending.

Markets and Markets expects the quantum computing market to expand at a CAGR of 33% from 2024 to 2029. If IonQ matches Wall Street's expectations and continues growing at a robust CAGR of 25% from 2026 to 2036, it could generate $1.38 billion in revenue by the final year. If it trades at a more reasonable 10 times sales by then, it could be worth $10.4 billion -- but that would only represent an 18% gain in a decade. At 20 times sales, its valuation could rise 214% to $27.6 billion.

Therefore, IonQ's stock could certainly head higher over the next 10 years. But with its valuations already hovering at such high levels, it could easily be cut in half before it doubles again -- so investors should exercise caution with this volatile stock.