The Quantum Computing Selloff Presents an Opportunity to Invest in IONQ Stock

IonQ, Inc. (IONQ), an emerging quantum computing company, saw its market value plummet by a staggering 39% last Wednesday after Nvidia Corporation (NVDA) CEO claimed useful quantum computing applications are decades away. The quantum computing selloff presents an opportunity for investors to consider betting on IonQ given that the company, unlike most of its peers, has already started monetizing its technology through strategic business partnerships.

Although it is true that we are a long way away from building a fully functional quantum computer, I believe IonQ is on the right track to rewarding investors handsomely through the commercialization of its existing technology. For this reason, I am bullish on IonQ.

IonQ Has a Unique Perspective on Commercialization

A key factor behind my bullish stance on IonQ is the company’s unique commercialization strategy which focuses on monetizing technological advancements along the way before building a quantum computer. During the Q3 earnings call, IonQ CEO Peter Chapman elaborated on this stance and claimed that IonQ believes today’s imperfect quantum computers can still provide value to businesses before addressing the challenges faced by quantum computing technology. This strategy, in my opinion, has paved the way for IonQ to generate meaningful cash flow to invest back in the business without relying solely on external financing.

IonQ’s unique strategy has already been successful. For the third quarter, the company reported revenue of $12.4 million, a notable improvement from just $6.1 million a year ago. IonQ currently generates revenue from designing specialized quantum computing hardware and also by offering quantum computing-as-a-service solutions.

IonQ’s progress is also evident from the recent deals the company has secured. For example, IonQ secured a $55 million contract with the U.S. Air Force Research Lab and also received an award of nearly $6 million from the Applied Research Laboratory for Intelligence and Security to explore the company’s potential to develop a system for blind quantum computing. These contract wins and the company’s focus on exploiting early monetization opportunities position IonQ as a unique player in the quantum computing space.

IonQ’s Quantum Technology Separates it From The Competition

IonQ’s use of trapped ion technology is another reason why I am bullish on the company’s long-term prospects. There are several qubit technologies used by different companies to advance their quantum computing efforts. For example, Alphabet Inc. (GOOG) uses superconducting technology while some of IonQ’s peers use silicon quantum technology. One of the clear advantages of the trapped ion technology used by IonQ is that quantum computers can be stored at room temperature compared to other quantum computers that need to be stored at freezing cold temperatures.

In addition, trapped ion technology also offers low error rates compared to superconducting. These features will likely allow IonQ to bring market-ready quantum computers well before many of its peers.

Although trapped ion technology offers many advantages, one potential downside is that it requires high infrastructure investments. However, IonQ has already made strong progress with infrastructure investments, paving the way for the company to focus on advancing quantum technology in the coming years.

IonQ Is Tapping a Large and Growing Market Opportunity

In addition to IonQ’s unique perspective on commercialization and its use of trapped ion technology, I am also encouraged by the large and growing market opportunity in the quantum computing industry. According to Precedence Research, the global quantum computing market was valued at just $839 million in 2023. Still, the market is projected to grow at a stellar CAGR of more than 30% through 2034 to $16 billion. Some of the main factors driving this growth are increased demand for high-performance computing, government sector participation in building the infrastructure for quantum computing, growing industry applications, enterprise adoption, and the integration of quantum computing with AI technology.

IonQ, through partnerships with government agencies such as the U.S. Air Force and corporate behemoths such as Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT), is well-positioned to emerge as a big winner of the quantum computing industry in the long run. To make the most of its first-mover advantages in this market, IonQ is also expanding globally, which is another promising sign. The company recently launched its first quantum computing center in Europe, which will likely open new doors to grow through strategic partnerships with regional government agencies.

Is IonQ a Buy, According to Wall Street Analysts?

Wall Street analysts share my optimism toward IonQ. Last month, investment firm D.A. Davidson initiated coverage of IonQ with a price target of $50. It noted that the company is well-positioned to capture the rapid growth of the quantum computing industry. Similar to what I said earlier, D.A. Davidson analysts also highlighted IonQ’s use of trapped ion qubit technology as a core technological advantage of the company compared to its peers. Benchmark also raised its price target for IonQ from $20 to $50 last month after digesting the rapid technological advancements reported by the company and the industry.

Based on the ratings of five Wall Street analysts, the average IonQ price target is $38.75, which implies an upside of 39.29% from the current market price.

See more IONQ analyst ratings

IonQ’s current valuation does not make much sense for investors, given that the company is still an early-stage business trying to break through to profitability. The company is currently valued at an exaggerated P/S multiple of 170, but things are likely to look more reasonable when the company starts recording revenue from the contracts it has signed with business partners, including the U.S. Air Force. At a market value of $6.5 billion, I believe IonQ is still cheaply valued compared to the long runway for growth in the quantum computing industry.

Takeaway

IonQ stock crashed on Wednesday along with other quantum computing stocks after Nvidia CEO Jensen Huang claimed it would take as much as 20 years to develop viable quantum computing applications. However, IonQ has separated itself from many of its peers by commercializing its existing quantum computing technology, paving the way for handsome long-term returns from its tech investments. I am bullish on IonQ as I believe its use of trapped ion qubit technology will help it secure a leading position in the fast-growing quantum computing market.

Disclosure.