Why IONQ Stock Looks Set To Take Off After the DMYI Merger

IONQ begins trading on Oct. 1. What’s the forecast for IONQ stock after the merger? Is it a good long-term buy?

Mohit Oberoi, CFA - Author

Oct. 1 2021, Published 1:13 p.m. ET

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Stockholders of dMY Technology Group III (DMYI) have approved its business combination with quantum computing company IonQ, and the stock began trading under the ticker symbol “IONQ” on Oct.1. What’s the forecast for IONQ stock after the merger? Is it a good buy?

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A vast majority of DMYI stockholders approved the merger in their vote, and redemptions are at just 2.5 percent—a welcome break, as many SPAC stockholders have recently been opting for redemption. That low redemption figure might not please speculators depending on a short squeeze around the merger vote, but it highlights IONQ's positive fundamentals. Its long-term forecast looks positive, despite the stock trading lower early on Oct. 1.

IONQ's stock forecast

Whereas several companies are working to develop quantum computers to revolutionize markets, IONQ is the only pure-play company. According to IONQ, its next-generation product is the “world’s most powerful trapped-ion quantum computer.”

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As part of its merger with DMYI, IONQ received over $600 million, which will power its growth and commercialize its quantum computers. The merger gave IONQ an equity value of $2 billion. In its merger presentation, the company said that its total addressable market would be worth around $65 billion by 2030.

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Currently, the company is not seeing much revenue. However, in 2026, it expects revenue of $522 million and adjusted EBITDA of $272 million. Currently, the stock is valued at a 2026 price-to-sales multiple of less than 4x.

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Is IONQ a good stock to buy?

IONQ forecasts its revenue growing by an impressive 150 percent compounded annually between 2021 and 2026. Though growth forecasts provided in SPAC mergers should always be taken with a grain of salt, quantum computing's outlook looks strong and IONQ is set to benefit.

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Being a pure-play quantum computing company, IONQ can carry a high valuation. The company also doesn't expect to burn a lot of cash, unlike most other recently listed startup companies. However, it doesn't expect to be free cash flow positive anytime soon, even by 2026.

All said, IONQ looks like it could be a multibagger if the company is successful in commercializing quantum computers. And if the stock falls, it could be worthwhile to add more shares.

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What are some other quantum computing companies?

There are no other pure-play quantum computing stocks. However, the following companies are also working on quantum computing:

  • Microsoft.
  • Alphabet.
  • IBM.
  • Honeywell.

There's also Arqit Quantum, a quantum encryption software provider that went public in Sep. 2021 and saw its stock jump after its SPAC merger. Even after tumbling, the stock is still trading significantly above the SPAC's IPO price. Like IONQ, it could be a good way to play the quantum computing industry’s positive long-term fundamentals.


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