With little news from the company since February, shares in IonQ (NYSE:IONQ) have more or less ebbed and flowed with the overall market. Falling back from early to mid-March, IONQ stock has climbed back up to the mid-teens per share.
Like I discussed in my article on this quantum computing play, it’s going to be years before it starts seriously monetizing its technology. With this, you may be wondering why the market still gives this pre-revenue company such a high valuation.
At today’s prices, IonQ has a $2.5 billion market capitalization. For reference, Wall Street analysts estimate the company will generate just $5.23 million in revenue this year. But while it may seem very pricey, it’s the future, not the present, that’s behind its premium valuation.
Quantum computing, which can handle the sorts of complex calculations classical computing technology can’t, stands to take off an industry as the decade plays out. By 2030, this space could have a total addressable market (TAM) of $65 billion.
A promising and well connected name in this space, it could grab a large share of this market. In turn, this could result in its shares down the road being worth many times what they trade for today. The caveat? You have to be patient. A company literally ahead of its time, it’ll likely deliver mixed performance, until it has its breakthrough moment.
The Latest With IONQ Stock
Again, there’s been little news with IonQ since February, when it announced several partnerships, including one with a major automaker, and another with the U.S. Department of Energy’s Pacific Northwest National Laboratory.
Yes, on March 28, the company will report its latest quarterly financial results. Given IONQ stock zoomed higher, and hit all-time highs, after its last earnings release, it’s possible that this earnings release will have a similar positive impact. Then again, current market conditions may make this difficult.
If you can recall, at the time it last reported numbers (November), growth stocks were having their last big hurrah. That is, before inflation, rate hikes, and geopolitical uncertainties sent the overall market, and growth/tech stocks in particular, to much lower prices.
Today, the market is viewing early-stage growth plays with a more critical eye than it did just four months ago. In short, we may not see a big surge if it has good news/updates to report on the 28th. Instead, we may see only, at best, a muted positive reaction for shares.
High Risks, High (Potential) Reward For Those Who Can Wait
While it may be awhile before IONQ stock goes on another incredible run, that’s not necessarily a reason to pass up on it. Given this is like investing in a publicly-traded startup, you should approach it like a long-term investment.
First, I would take a deep look at the company, the quantum computing industry, to see for oneself whether the facts lineup with management’s confidence in its future prospects.
That’s not to say you need to become a quantum computing expert. Even so, it’s better to have a rationale for owning this stock that goes deeper than just “$65 billion TAM by 2030.”
Second, it goes without saying this shouldn’t be a “bet the ranch” type of play in your portfolio. Either quantum computing becomes widely adopted, creating a multi-billion dollar industry. Or, this technology fails to gain widespread usage, severely diminishing the potential value of this company. At most, make this a small, speculative position in your portfolio.
Third, have the patience to let the whole story play out. Between now, and when it experiences its above-mentioned “breakthrough moment,” shares will stay very volatile. If good news sends it soaring by double-digits? You may feel the urge to cash in too soon. If a temporary setback sends it sinking by double digits? You may end up panic selling.
The Bottom Line
Unless other quantum computing names go public, IonQ is the only game in town if you want exposure to the potential for this industry to experience hypergrowth in the years ahead.
That said, based on the partnerships and the progress it’s made, the company is off to a great start. If this technology truly is the “next big thing,” there is a strong chance it experiences substantial rise in value over the long-term.
At the same time, it remains very risky. Instead of becoming the “next big thing,” quantum computing could end up not becoming widely-used at all. To reiterate, this underscores the need to fully understand this company and its technology. In addition, the need to size a position in line with its downside risk. On top of all this, you need the patience to ride out any hiccups that arise along the way.
Earning a “B” rating in my Portfolio Grader, IONQ stock could be a great opportunity if you approach it the right way.
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.