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What Makes IONQ Stock a Buy? Here’s the Bull Case.

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  • IonQ’s (IONQ) Q3 highlighted the company’s robust performance, exceeding expectations. 
  • The company’s computational strength has exceeded projections, and insiders remain consistent net buyers.
  • Like Nvidia (NVDA) the company stands to gain from the swift growth of the AI market. 
IONQ stock - What Makes IONQ Stock a Buy? Here’s the Bull Case.

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For a pure-play quantum computing stock, consider IonQ (NYSE:IONQ), a frontrunner since going public. Despite being speculative, IonQ stock holds substantial growth potential, pioneering trapped ions for quantum computers, aiming to reduce error rates and heating effects compared to rivals. The results of using ytterbium atoms in electromagnetic fields for qubits are promising.

Here’s every bullish reason to bet on IonQ stock now (if you haven’t yet!)

Excellent Q3 Earnings

IonQ, a quantum computing industry leader, reported Q3 2023 financial results, marking a pivotal year. Achieving $100 million in bookings within three years since 2021, surpassing goals. Peter Chapman, CEO, noted technical momentum ahead of schedule. 

This quarter saw validation with a $25.5 million deal with the US Air Force Research Lab for quantum networking exploration. IonQ unveiled two future generations: IonQ Forte Enterprise, which integrates seamlessly into data centers, and IonQ Tempo, which delivers quantum advantage for certain applications.

In Q3 2023, IonQ reported revenue of $6.1 million, surpassing the provided range, marking 122% growth from the prior year’s $2.8 million. New bookings totaled $26.3 million in Q3 and $58.4 million year-to-date as of September 30, 2023. IonQ achieved its goal of $100 million in cumulative bookings within the first three years of commercialization, starting in 2021, a quarter ahead of prediction. 

Cash, cash equivalents, and investments were $485.1 million as of September 30, 2023. The net loss was $44.8 million, and the Adjusted EBITDA loss was $22.4 million for Q3, excluding a non-cash loss of $7.6 million related to the change in the fair value of IonQ’s warrant liabilities.

Rumors of Being the “Next” Nvidia

Unlike traditional binary systems, quantum computers utilize “qubits,” allowing simultaneous storage of zeros and ones, enabling faster data processing. IonQ addresses size and cost issues with a “trapped ion” architecture, producing smaller qubit processing units (QPUs) than competitors. 

Its QPU system is two inches wide, while IBM’s single QPU requires a six-foot-wide refrigerated casing. In contrast, Alphabet’s Google has developed a QPU system approximately 20 feet wide.

Nvidia’s (NASDAQ:NVDA) GPUs excel in AI tasks using vector processing, handling a wide array of integers and floating point numbers simultaneously. Traditional CPUs with scalar processing are less efficient for complex AI and machine learning. Quantum computing, moving beyond binary methods, can further accelerate these processes.

Fortune Business Insights predicts a 32% CAGR in the quantum computing market from 2023 to 2030. IonQ collaborates with Zapata AI, specializing in quantum-powered generative AI solutions. In partnership with DARPA, IonQ, Zapata, and associates received funding to develop new quantum benchmarking tools.

IONQ’s Plug and Play Quantum Computers

IonQ introduced designs for two new “enterprise-grade” quantum computers at the Quantum World Congress. Unlike its previous systems, these devices are designed to fit in standard server cabinets, making them more versatile and scalable. 

The Forte Enterprise, available next year, features 35 “algorithmic qubits” (AQ) and is 40% smaller than its predecessor. In 2025, IonQ plans to launch the 64-AQ Tempo, its first system capable of outperforming classical computers on specific tasks, fitting into just three cabinets.

IonQ aims to democratize quantum computing by adopting an industry-standard form factor, enhancing compatibility and affordability. CEO Peter Chapman emphasizes the company’s commitment to high-performance machines with reduced costs per generation, achieving a significant redesign for a more compact, 19-inch-wide server cabinet. 

Unlike competitors, IonQ’s trapped-ion technology isolates ytterbium ions with electromagnetic fields, programmed using lasers, requiring substantial optical hardware.

Buy IONQ Now

IonQ’s stock debuted at $10.60 post-merger with a SPAC, reaching $3 last December but rebounding to $12. With an enterprise value of $2.4 billion, trading at 109 times this year’s sales, its frothy valuation may be constrained by losses and high interest rates. 

Though risky in the volatile market, IonQ is the sole publicly traded “pure play” in quantum computing. Its upside potential hinges on successful business scaling. With a $2.4 billion enterprise value, it could attract takeover interest if it defies bearish expectations.

On the date of publication, Chris MacDonald 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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