For investors interested in true cutting-edge growth stocks, IonQ (NYSE:IONQ) bears further scrutiny. IonQ bills itself as the first publicly traded pure-play quantum computing company. Thus, IONQ stock could represent a generational opportunity.
At the same time, history is littered with first mover companies that faded away into obscurity. Given that IonQ only underwent its SPAC-funded business merger with dMY Technology Group on Oct. 1, it’s simply too early to tell. That said, let’s look into the reasons IonQ could become a generation-defining firm.
IonQ and Quantum Computing
In order to understand why investors are interested in IonQ, it’s necessary to understand the concept of quantum computing itself. At its most basic level, quantum computing combines the fields of quantum theory and computing.
Quantum theory explains the behavior of particles on the atomic and subatomic level. That’s a field that I have neither the time nor ability to explain in any further depth. But what’s important is that quantum computing fundamentally changes the behavior of the 1s and 0s that undergird computing.
Computing is limited. Information is encoded as bits represented as either 0s or 1s. But quantum computing utilizes the ability of quantum theory in which particles can exist in multiple states simultaneously. Instead of bits, it uses qubits. Qubits are unique in that they can be either a 1 or a 0, or both at once. What that means is that quantum computers potentially have a much greater ability to encode information. Thus, all the excitement.
I mentioned earlier that we’re very early in the game. IonQ’s future is far from settled. That said, there are a few very encouraging signs that indicate its position could truly make it a pioneer.
Arguably the most important early sign is that IonQ is the only hardware available on all three of the major cloud computing competitors. Amazon’s (NASDAQ:AMZN) Web Services, Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud, and Microsoft’s (NASDAQ:MSFT) Azure all support IonQ’s quantum hardware.
As the company pointed out in its investor presentation, no other company is available on more than one of those three clouds. One current advantage of quantum computing is its application in improved machine learning and AI.
IonQ’s products and services could ultimately lead to vastly improved machine learning and more predictive AI. The company introduces an example of its application in producing a target distribution in the above mentioned investor presentation.
Based on the data provided, it looks like its algorithm leads to a distribution that much more strongly resembles the target in a fraction of the time.
The example given related to a financial services firm and IonQ quantum computers. The goal is to provide faster trained computer models, which has massive applicability across financial services.
But pulling out to a 10,000 foot view, anything that requires computing stands to benefit. So, that’s why IonQ as a company is garnering so much attention.
So what should we know about IONQ the stock?
IONQ Stock Performance
Despite all of the potential I’ve just explained, IonQ remains a very small company. That isn’t surprising given that it is an upstart, growth firm. Nevertheless, the $233,000 in revenue that the firm posted in Q3 is bound to give investors pause. Further, IonQ posted a $14.8 million net loss in the quarter.
It’s fair to note, then, that IONQ stock represents the kind of investment pitfalls growth stock detractors warn about. It may never take off despite the early partnerships with all three cloud giants.
Yet at the same time, IonQ maintains $587 million in cash and cash equivalents at the end of Q3.
There’s a lot of time to bank profits on IONQ stock in the future. At the start of Dec. 2, shares were $20.66 following a drop from Nov. 18’s high of $35.90. They carry a target price of $26.50. Given recent earnings, there’s probably next to no chance that prices will rise quickly soon.
If the idea of quantum computing appeals to you as an individual, perhaps buy as prices fall. They’ll certainly be volatile moving forward. That’s the opportunity as it stands now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.