IonQ stock price analysis: high-risk, high-reward investment

By:
on Nov 24, 2023
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  • IonQ share price has rebounded in the past few weeks as investors buy the dip.
  • The company is still making huge losses but this is offset by its huge cash hoard.
  • IonQ is a high-risk and high-reward company in the quantum computing industry.

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IonQ (NASDAQ: IONQ) stock price has had a turbulent experience in the past few months. It initially jumped from a low of $3 in January to a high of $21.60 in October as investors cheered its quantum computing and artificial intelligence progress.

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IonQ shares then retreated and reached a low of $9.20 in November and then pulled back to over $12. This price action has brought its total market cap to over $2.5 billion.

High-risk and high-reward

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IonQ is a company that is building products in the quantum computing industry. For starters, this is a technology that seeks to change how people and companies compute. Most experts, including Michio Kaku, believe that this computing can dramatically improve the world.

As the name suggests, this technology harnesses the laws of quantum mechanics to solve problems that are complex for current computers. For example, while a normal computer can handle large datasets and computations, it can struggle to handle more complex problems like simulating how molecules and atoms behave.

IonQ has spent the last few years working on its quantum computing products and recently started shipping them. This explains why the company’s revenues are significantly small and don’t justify the $2 billion valuation.

In its most recent quarter, IonQ revealed that its total revenues jumped by 122% to $6.1 million. It also added $26.3 million in bookings during the quarter as companies and the US military took advantage of its products.

IonQ also boosted its bookings estimates. It raised its estimates for the year to be between $60 million and $63 million. It hopes that its bookings will move to over $100 million in 2024. 

I believe that IonQ is a high-risk and high-reward investment, especially for people with a long-term horizon. First, it faces the risk of high losses, which will remain for a while. In Q3, its total loss stood at over $44 million, higher than the $24 million it lost in the previous year. 

This risk is offset by the fact that the company has a strong balance sheet with over $485 million in cash and equivalents. This means that it will likely not dilute its investors by raising capital any time soon. It could still do that to fund strategic M&A.

The other risk is the general growth and adoption of quantum computing. While experts believe it is the future of computing, it is unclear whether there is strong demand for its products.

Therefore, if the industry booms, there is a likelihood that IonQ will be a key beneficiary. In this case, from a fundamental perspective, there is a likelihood that the shares will do well over time.

IonQ stock price forecast

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IonQ stock

IONQ chart by TradingView

In my last article on IonQ, I warned that it could have a bearish breakout because of the double-top pattern that formed at about $20. This view was correct as the stock made a bearish breakout and moved below the neckline at $12.6. 

The stock has now bounced back and moved slightly above the neckline. It remains below the 50-day and 100-day Exponential Moving Averages (EMA), which have formed a bearish crossover pattern. 

Therefore, from a technical perspective, there is a likelihood that the shares will retreat in the coming weeks. This will happen as it forms the second stage of Elliot Wave or even the double-bottom pattern. 

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