‘Next Two Years Will Be Crucial,’ Says Craig-Hallum About IonQ Stock

IonQ (NYSE:IONQ) shares tumbled ~13% in the opening session of the week, retreating after a massive runup in recent months. Despite Monday’s dip, shares of the quantum computing innovator are still up by a big 246% over the past 3 months alone.

So, what has been behind that performance? Well, the company is emerging as a leader in quantum computing and in September, IonQ announced it had secured the largest U.S. quantum computing contract for 2024, nabbing a $54.5 million deal with the Air Force. That has underscored the confidence in its tech while its systems are well-suited for tackling complex challenges in areas like optimization, machine learning, and materials science.

The company has also formed partnerships with major cloud platforms AWS, Microsoft Azure, and Google Cloud and that could help bring quantum computing within reach for businesses, paving the way for real-world applications. IonQ has also partnered with pharma giant AstraZeneca and simulation software maker Ansys, amongst other names. And last week, the company announced that it had been granted five new patents and following the pending acquisition of Quibitekk, a quantum networking specialist, is set to secure 118 additional patents.

So, plenty happening here and investors have obviously been thinking IonQ could play an important role as this field develops, though it still early days, both for the quantum industry and the company, specifically.

That can be seen by the relatively modest revenue haul. In the recently reported Q3 earnings, the company generated revenues of $12.4 million, although it should be noted that this figure was up by an impressive 103.3% compared to the year-ago period and also beat Street expectations by $1.82 million.

Craig-Hallum analyst Richard Shannon says that most investors see IonQ (and quantum computing in general) as a “late stage science/engineering project, but not one that will result in real-world revenues any time soon.”

So, the obvious question investors will ask is “How long before this generates real-world sales?” Shannon thinks the “hope is within two years” and that is not such a far-fetched idea. In fact, Shannon thinks investors should be paying close attention here.

“The potential for real-world revenues from leading global companies – in the next two years – would create a sea change in the viewpoint that investors would take with this stock and the entire quantum space,” he explained. “We think investors should have positions in place well before this time, which means they need to be involved now. The potential for partnership, investments and even M&A from the world’s largest tech companies is probably sooner than most think. Most investors in this space have small positions to force them to pay attention. Now is the time to start a bigger position.”

That’s a bold take and Shannon backs it up with a Buy rating although his $22 price target suggests the shares are due a ~13% pullback right now. (To watch Shannon’s track record, click here)

It’s a similar story amongst Shannon’s colleagues; the stock claims a Strong Buy consensus rating, based on 3 Buys vs. 1 Hold. That said, the $19.23 average target implies the stock is currently overvalued to the tune of ~24%. It will be interesting to see whether the analysts downgrade their ratings or upgrade price targets over the coming months. (See IONQ stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.