IONQ Stock Forecast: Good Buy in Emerging Quantum Computing Industry

Mohit Oberoi, CFA - Author

Nov. 24 2021, Published 9:36 a.m. ET

In October, dMY Technology Group III (DMYI) merged with quantum computing company IonQ. The stock has surged since the merger date but has come off its 52-week highs. What’s the forecast for IONQ stock and is it a good quantum computing stock to buy?

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Quantum computing is an emerging industry. However, IONQ became the first pure-play publicly-traded quantum computing company. Investors were also bullish on the stock and only about 2.5 percent of DMYI stockholders opted for a redemption. In many other SPAC mergers, a large number of investors opted for redemption.

Quantum computers have very high computing powers.

Quantum computers have very high processing power and can revolutionize the computing market. Quantum computing involves the use of quantum mechanics to solve problems that can’t even be solved by today’s supercomputers.

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Quantum computing has been around for a long time. IBM said that it has been working on quantum computers for over two decades. Microsoft, Honeywell, and Alphabet are also working on quantum computers. However, what separates IONQ is the fact that it's a pure-play quantum computing company.

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The forecast for IONQ stock is positive.

The outlook for quantum computing, and by its extension IONQ, looks positive. Since the company got listed recently, only a few analysts are covering the stock. They have given a consensus target price of $27 to IONQ, which is a premium of around 8 percent. Of the four analysts covering the stock, three have a buy rating, while one has a hold rating.

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Goldman Sachs issued a bearish note on IONQ stock.

Goldman Sachs initiated coverage in IONQ stock with a neutral rating and a $28 target price. The brokerage is cautious about quantum computing due to uncertainty regarding its adoption and commercialization. However, most brokerages are otherwise bullish on the industry’s long-term fundamentals.

IONQ achieved a new milestone in quantum computing.

IONQ said that it has received TCV (total contract value) bookings of $15.1 million in the first nine months of 2021. However, more than the revenues, markets were interested in the commentary on the development and IONQ didn't disappoint.

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Peter Chapman, the president and CEO of IonQ, said, “IonQ delivered a number of significant milestones this quarter, delivering upon our technology roadmap and accelerating the commercialization of our quantum computers.” The company pointed to industry benchmarking by QED-C, which showed that its hardware is superior to competitors.

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The company also reached the milestone of achieving the first-ever error correction demonstration in the quantum computing industry.

IONQ has premium valuations for a reason.

IONQ isn't generating much revenue currently but its market cap is now almost $4 billion. While it might sound high considering the many scenarios for quantum computing, investors are willing to pay a premium for pure-play quantum computing names.

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For example, Arqit Quantum, a quantum encryption software provider that went public in September, also trades at a significant premium to the SPAC IPO price.

Coming back to IONQ, it looks like a good stock to buy. If it comes down more from these levels, it would be a good opportunity to add the stock to your portfolio and bet on the quantum computing industry.


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