Investing in speculative stocks comes with its own set of unique perils. The share price of IonQ (NYSE:IONQ) stock rocketed from a low of $8 to a high of $36 within a few short weeks.
I assumed it was because the market realized the game-changing potential of IonQ’s quantum computing technology. However as quickly as that confidence appeared, it evaporated, sending the stock lower.
In this article, I take a look at the short-term and long-term prospects for IONQ stock. Should investors take advantage of this sell-off to accumulate shares at lower price levels?
Cautious Outlook is Causing a Short-term Sell-off
Wall Street analysts turning more cautious on IONQ stock sparked a massive sell-off. The stock went from a high of around $33 to its current price level of about $15. This was a steep 54% drop within a few short weeks. A firm level of support has not yet been established indicating that the stock may drop even further.
A Nov. 22 Seeking Alpha article highlighted that it was Goldman Sachs (NYSE:GS) that sparked this decline. The investment bank caused a sell-off of 14% in a single day when its analyst released his report. This sparked the sell-off.
The comments by analyst Toshiya Hari weren’t particularly damning. He mentioned that the company is early in the “nascent quantum computing market,” and that there is a high level of uncertainty around adoption. This is of course true, as IonQ does not have any meaningful sales and revenue at this early stage. Its stock price in the short to medium-term will all depend on investors’ confidence.
Unfortunately, that confidence has been shaken by macro-economic factors outside the IonQ’s control. Right now fears on inflation and high-interest rates are causing analysts to slash valuation targets on a lot of high-growth names.
It’s too early to say that IONQ stock is trending downward. However, I wouldn’t be surprised to see the stock test its 200-day moving average of about $12. Hopefully, this would constitute a strong enough level of support. Otherwise, IonQ investors should expect a lot more pain in the months to come.
Quantum Computing Has Game-Changing Potential
Analyst Hari has a pretty good track record. Website TipRanks rates Hari a five-star analyst, #246 out of 7,761 that it tracks. Following his picks would have netted you an average return of 24.0% with a 68.57% overall success rate. He had set a $22 price target which implies a 46.6% premium from the current share price.
This means that IONQ stock is trading at decent valuations relative to its potential. In my view, IonQ could be a possible game-changer. The company’s quantum computing technology uses individual atoms to perform calculations. It’s quite fascinating and frankly can be mistaken for science fiction.
However, if it works and is stable, IonQ’s quantum computer can solve complex problems beyond even the realm of today’s largest supercomputers. Multiple disruptive industries can benefit from quantum computing. Examples of use cases are drug discovery and autonomous vehicles.
Currently, the quantum computing market is expected to reach $3.7 billion by 2030 with a CAGR of 25.4%. But trying to value the quantum computing industry is like trying to put a value on the internet in the mid-90s. Practically impossible.
If quantum computing works, it will change the world in ways we cannot even begin to think about. Assuming that happens IonQ could become one of the most valuable companies for the next few decades. Therefore speculative investors should consider getting in early on IONQ stock. The stock may lose some more value in the short term. But it could be worth multiples of the current stock price in the future.
On the date of publication, Joseph Nograles 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.