Back in 2015, a team of engineers from the University of Maryland came together with an idea to develop and manufacture quantum computers which can be used to solve a variety of problems that are currently intractable with classical computers, such as drug discovery and materials science; for example, they can be used to simulate the behavior of molecules and materials.
According to Zion Market Research, the current size of the global quantum computing market was just $457 million in 2021 but is forecast to to hit $5.2 billion by 2030. That’s a promising growth rate for IONQ, which is poised to benefit. However, the stock is already up 193% year-to-date, so can it still propel higher?
- IONQ is perched well in a market that is poised to grow rapidly from now through to 2030.
- It is a leading quantum computing company that is well-capitalized, has a top notch team and leading technology.
- It has yet to realize its revenue potential but the market capitalization suggests investors are highly optimistic about its prospects.
Positioned To Capitalize On Growth
IONQ has already separated itself from the pack by going public at an early stage via a SPAC. That has created a strong balance sheet where the company sits on $311 million in short-term investments and close to an additional $50m in cash (as of the end of its prior fiscal year).
Two other factors support a bullish investment thesis: cutting-edge technology and a highly experienced team. The combination has enabled IONQ to forge partnerships with the likes of Microsoft and Amazon.
It’s no surprised that the top technology companies have embraced IONQ as a partner. The company’s technology is based on trapped ion qubits, which are considered to be one of the most promising approaches to building a scalable quantum computer. And IONQ has already achieved a number of milestones, including the development of a 117-qubit quantum computer and the creation of a quantum computer that can be used by customers through the cloud.
The broad range of applications for these quantum computers are what excite investors. Everything from helping researchers to develop materials with desired properties to simulating chemical reactions, and even optimizing financial portfolios lies on the horizon.
What Could Derail the Bull Thesis?
As rosy as the picture seems, the quantum computing market is still in its early stages of development. IONQ last year generated just $11 million in revenues yet enjoys a $1.7B market capitalization. Clearly, investors are betting on rapid commercialization and fast revenue growth. But the company is young and with a limited track record, so risks remain very high that it will not be able to generate enough revenue to sustain its operations.
Another big concern is competition from other quantum computing companies let alone titans like Alphabet that are better resourced and have superior technology.
Regardless, IONQ has clearly delivered for shareholders already this year in a big way, soaring higher by 193%. And if the experienced team truly can build a quantum computer that is more powerful than any classical computer, as many analysts forecast within the next development cycle, the company stands to revolutionize computing and benefit in a massively. Or in other words, it remains in the early innings of what its potential could be for revenues and market capitalization.