It’s an understatement to say it’s been a tough time if you invest in speculative growth stocks. Names like IonQ (NYSE:IONQ) have seen price drops since late November, when the market began to shy away from such plays, due to the prospect of higher interest rates. In the case of IONQ stock, it’s dropped from prices well over $30 per share, down to as low as under $10 per share.
In recent weeks, as investors have calmed down a little with their rate hike jitters, shares in this quantum computing firm have begun to bounce back. At writing, it’s changing hands at just under $15 per share.
That said, the near-term could stay volatile. I would dive into it at today’s prices, with the expectation a full trip back to its highs is just around the corner. Mainly because of the uncertainties that have knocked it down in recent months remain.
Also, it’s going to be several years before this company, generating relatively low amounts of revenue now, has its true “liftoff” moment. That is, when it really starts parlaying its technology into a large, profitable enterprise. Even so, there is potential for shares to take off well before its big moment arrives.
IONQ Stock at a Glance
So, what’s the story behind IonQ? Founded in 2015, the company is in the business of developing quantum computing systems. In a nutshell, these types of systems can tackle complex calculations, light-years ahead (figuratively) of classical computing technology.
I know this is a subject that is tough to wrap one’s head around. But what’s more important is the possibility of this industry taking off in the coming years. According to a figure cited in its September 2021 investor presentation, quantum computing could be a $65 billion total addressable market (TAM) by 2030.
With this, it makes sense why so many dived into IONQ stock, after the special purpose acquisition company (SPAC) merger that took it public last October. It was, and still is, the only pure play quantum computing stock out there. Yet in hindsight, it’s obvious the crowd overdid it a bit.
Put simply, it was premature to send it up to prices north of $30 per share. IonQ has started commercializing its product. Not only that, as one sell-side analyst (Goldman Sachs’ Toshiya Hari) argued in November, it’s uncertain whether this technology will ever see mass adoption.
It May Not Take Much to Send it Bouncing Back
I’ll reiterate that IONQ stock is not something you should dabble in as a short-term play. Right now, speculative growth is falling out of favor. In today’s environment, it’s going to be difficult for shares to soar on little to no news.
But if we’re talking about a longer timeframe? There may be a path to recovery. Yes, I stated in the opening that IonQ’s “liftoff” moment is years away. Per the company’s own forecasts, it won’t be until the mid-2020s (at least) that it’ll be generating material amounts of revenue.
Even so, the company doesn’t necessarily need to start generating high amounts of revenue before it can move back to higher prices. Instead, much less could do the trick. In other words, news of further progress in its efforts to improve/monetize its quantum computing systems.
For instance, further news of progress with its quantum computing technology. Or more news of major commercial partnerships, like the one it recently made with a large automaker. These types of development will help bolster confidence in two ways. First, bolster confidence that quantum computing is something that’s on the cusp of seeing mass adoption.
Much like what we’re seeing with artificial intelligence, machine learning, and other emerging technologies. Second, it will bolster confidence that this company in particular, which before going public received funding from a “who’s who” of defense contracting, electronics, tech, and venture capital firms, could become a major name in the space.
The Bottom Line
Earning a “B” rating in my Portfolio Grader, only consider IONQ if you can handle its high risk. Besides the risk of tech stocks staying volatile for the time being, there’s longer-term risk to consider as well.
Namely, a lot is riding on the above-mentioned “$65 billion by 2030” TAM projection playing out for quantum computing. For shares to truly take off in price, this technology needs to become mainstream. The jury’s still out whether this will happen.
Its high-risk notwithstanding, you may want to buy IONQ stock. If you’re confident this technology will take off in use? This is the best (albeit the only) way to play it.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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