IonQ (NYSE:IONQ) is a recently-listed company seeking to develop the quantum computing market. IonQ came public via a special purpose acquisition company (SPAC). IONQ stock has enjoyed the sort of volatility that traders have come to expect with SPACs.
To put numbers on that, IONQ stock dipped to $8 as its deal closed. Then it skyrocketed to $35. In just a couple months, it has now fallen just below the opening $10 level. While this has been a paradise for day traders, it’s surely been a frustrating experience for longer-term investors.
However, the steep decline of late offers something of a second opportunity. The last time I covered IONQ stock, I noted that there was a lot to like about the company aside from the elevated price. In fact, I suggested taking profits on shares following the Q3 earnings report simply because the price had run up so much. Now, with the stock down by more than half since then, is it time to buy back in?
IonQ Stock: Little News To Justify Recent Plunge
Back on November 15, IonQ reported its Q3 earnings. They were well-received and the stock was up around $30 at this time. That would be close to its all-time high before its downturn began.
Since then, IonQ has not reported any additional earnings. Nor have there been big developments that would cause a sell-off of any significant magnitude.
Arguably, the biggest development was one of the firm’s directors engaging in insider selling. Director Harry You sold approximately $45 million of IONQ stock. That’s certainly not a positive development, particularly given the large dollar amount attached to that sale.
However, it’s far from uncommon for insiders to take some exposure off the table on these SPAC deals. After owning an illiquid private company for many years, insiders want to diversify their holdings once they are able to. If insiders keep dumping IONQ stock throughout 2022, that’d be a negative. But IonQ’s massive decline as of late is based more on general market turmoil than anything specific to the quantum computing firm.
With Limited Fundamentals, Sentiment Drives Everything
IonQ is projected to generate $6 million of revenues in 2022. That’s up sharply from 2021, yes. However, it’s such a small number as to be nearly irrelevant.
In 2023, analysts project IonQ’s revenues rising to $16.3 million. This would be more than 150% year-over-year growth, which sounds amazing. On the other hand, it’s only $16.3 million of revenues, which is a tiny figure for a publicly-traded company.
Long story short, IonQ is closer to a venture capital investment than a proven commercial business at this point. IonQ has fascinating technology that could totally change its industry. Or, it may struggle to ever reach commercially viable levels of ongoing revenues. The company’s prospectus was pretty frank about both the risks and opportunities that the company faces over the next few years.
Given that IonQ can’t really prove its business model’s viability in 2022, the stock price will continue to inexorably swing based on outside factors.
On Monday, for example, IONQ stock plunged more than 10% in the morning, but rallied and closed the day green. There wasn’t anything particular to IonQ to cause such a reversal. Rather, the NASDAQ had plunged in the morning and recovered in the afternoon.
IonQ, as a smaller more-volatile firm, simply saw a magnified version of that same swing. Then, on Thursday, IONQ stock plunged more than 10% on the day and failed to immediately recover. Given IonQ’s lack of much specific newsflow in 2022, expect more of this sort of frenzied trading action throughout the year.
IONQ Stock Verdict
So, after all the roller coaster ride, IONQ stock is back to where it started. There’s a decent chance IONQ stock will go back to $20 if and when growth stocks recover. But IonQ could easily slide to $5 as well if the growth sell-off continues. There’s so little in the way of near-term fundamentals that market sentiment will almost entirely drive IonQ’s stock price in 2022.
What’s that mean for traders? As the price declines, if you want to own the firm, consider dollar-cost-averaging into a position. And when shares rip to the upside, don’t be afraid to trim a little. In this way, you can harness the incredible volatility of IONQ stock to your favor. Shares aren’t cheap enough to make IONQ stock an obvious buy at this price, but they’ve dropped enough that we could easily get a solid relief rally from here in coming weeks.
On the date of publication, Ian Bezek 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.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.
