Shares of IonQ (IONQ +5.31%) rose 259.1% in 2023, according to data from S&P Global Market Intelligence. The quantum computing researcher and systems developer reported more bottom-line misses than positive surprises last year, but its revenue grew faster than expected in each report. More to the point, the company seems to have found a path toward long-term profitability as its trapped ion quantum computing technology evolves and finds real-world use cases.
IonQ by the numbers
Let's start with the pure numbers. IonQ's bottom-line earnings fell short of analysts' consensus estimates in three of the last calendar year's four financial updates. However, top-line sales always exceeded the analyst group's average estimates. The average margin of surprise on this metric was 20.5%. Not too shabby, right?
I'm talking about fairly small numbers, of course. IonQ is a young and small company, early in its quest for long-term success. The most lucrative report covered the third quarter, where sales rose 122% year over year to land at $6.1 million.
The company also penciled in $26.3 million in third-quarter order bookings, lifting the year-to-date order volume to $58.4 million. In other words, IonQ is building a robust backlog of firm orders to fill later. This gives management and investors a clearer view of upcoming sales growth as the orders are filled and paid for, converting the backlog into actual revenue.
Investors are thrilled about IonQ's explosive revenue growth and promising technology progress. IonQ's stock trades at a nosebleed-inducing 120 times sales today. That number would look pricey as a multiple of earnings or cash flows, and it's kind of mind-blowing in the context of sales multiples.
NYSE: IONQ
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Is IonQ a future industry giant?
It should be said that quantum computing is in a very early stage, to the point where it's hard to find real-world use cases where a very expensive quantum system can outperform a cheaper digital computer. Frankly, a basic calculator is often the better choice so far.
That should change over the years as IonQ and its rivals develop more powerful computers while clients explore new algorithms. In the long run, quantum computing promises to disrupt the computing market in many ways. From cryptography and city planning to drug development and financial modeling, these nonbinary computers will eventually be able to make insightful leaps that just aren't possible with traditional systems.
But that's a dream for the years and decades ahead. So far, the Nature science magazine says that current quantum computers are good for "absolutely nothing." It's all research, experimentation, and planning for future developments at this point. So when IonQ sells a $13 million system to the U.S. Air Force, it won't crack international spy codes or predict the enemy's troop movements anytime soon. It's almost a toy, giving military researchers some hands-on experience with the concepts of quantum computing for future use.
So it's a little early to get hyper-enthusiastic about IonQ or any other quantum computing expert. This company might become an industry titan in the long haul -- or it could run out of money and implode before getting that far. The difference between these extreme outcomes may lie in a single season of slow sales or a stubborn glitch in the system-building process. The company is already struggling to keep the financial performance promises it made before going public in the fall of 2022 -- not a good sign.
Feel free to make a small, speculative investment in IonQ if you expect its technology to change the world. It very well might. Just be prepared to lose it all in a worst-case scenario, and keep that IonQ stake reasonably small. Diversification is a growth-stock investor's best friend, after all.
