IonQ: Technology to Love, Valuation to Hate

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IonQ, Inc. (NYSE:IONQ) is a technology company that develops quantum general purpose computer systems. His website claims that “quantum computing can change the world.” Investors seem embarrassed by this bold statement, as they have witnessed a three-month return of nearly -51% of IONQ shares. However, IONQ shares also have a monthly return of 17.2%. The stock is currently at a loss of about 9.5% since the beginning of the year at a time when many other technology stocks have seen strong sell-offs amid rising interest rates and geopolitical challenges.

Conceptual image of a processor representing quantum computing.

Source: Amin Van / Shutterstock.com

IonQ decided to go public in a way that attracted a lot of attention in 2021. He did this by merging with a special acquisition company (SPAC).

IonQ states that it is the first public company to engage in quantum computing. This is an important milestone, but it should prove its worth soon. Aside from marketing help, IonQ focuses a lot on innovation. Having a vision to change the world will require results.

What factors can bring these results? For starters, they include a very important partnership with a leading car manufacturer.

IonQ and Hyundai Motor

IonQ and Hyundai Motor Company (OTCMKTS:HYMTF) announced a partnership “to develop new quantum eigensolver variation algorithms (VQE) to study lithium compounds and their chemical reactions involved in battery chemistry.”

This is great news for both companies and can solve many of the problems that modern electric cars have. These include: limited range of autonomy, long time to charge and deterioration of battery performance over time. It’s like keeping a cell phone for over a year by actively using it. Its battery performance will decline rapidly. Imagine that you have invested a significant amount of money in an electric car. In a few years you will need to charge it more often as the battery will lose its brand new high performance.

For IonQ, a partnership with a well-known and reputable car manufacturer, such as Hyundai, adds bonuses to the brand name. It should also be noted that IonQ is the first and only quantum hardware integrated with all major cloud platforms such as Microsoft Azure, Amazon Bracket and Google Cloud. Adding partnerships with other companies in sectors in need of technology is a very smart move.

Hyundai also benefits from research and development of better quality batteries. These batteries explore improvements in excessive discharge cycles, durability, capacity and safety. This is a win-win situation for both parties.

Quantum computing techniques

Because quantum computing is such a niche field, it really needs a scalable solution to be able to go mainstream. And IonQ hopes to fill that gap.

IonQ and the Duke Quantum Center at Duke University have announced a new quantum gate that can help scale quantum algorithms and support many key quantum computing techniques. This advancement of quantum technology could quickly become mainstream.

A sad story for IONQ Stock

In the third quarter (3rd quarter) of 2021, IonQ reported a profit of $ 223,000, a net loss of $ 14.8 million and a large amount of cash and cash equivalents of $ 587 million. Financial forecasts expect bookings of $ 600,000 to $ 800,000 for the fourth quarter of 2021 and approximately $ 15.7 million and $ 15.9 million for the full 2021.

I am even more worried that the expected income for the whole of 2021 was estimated at 1.5-1.7 million dollars.

At the close of the US stock market on February 16, IonQ was worth $ 15.82 and had a market capitalization of $ 3.045 billion. Let’s do the calculations and calculate the price-to-sales ratio (P / S) for the last twelve months. Assuming that the IonQ estimate turns out to be correct, the calculation will be 1791x.

It’s just too high.

As of February 17, the cost-to-book ratio (P / B) is 5.28. This is another sign that stocks are now trading at a big premium.

IonQ has great business potential supported by recent partnerships. The shares, however, do not present any plausible arguments in his favor. The firm loses money and revenues are not very significant. This puts IONQ shares in the category of simple monitoring for further catalysts, and the best of them will be sustainable earnings growth. The path to profitability will take more time and will require a lot of effort.

At the date of publication by Stavros Georgios, the CFA had (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are governed by the Instructions for Publishing InvestorPlace.com.

Stavros Georgiodis is a CFA charter holder, capital research analyst and economist. It focuses on U.S. stocks and has its own stock market blog at thestockmarketontheinternet.com/. In the past, he has written various articles for other publications, and can be contacted on Twitter and LinkedIn.

IonQ’s post: Technology for Love, Hate Rating first appeared on InvestorPlace.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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