The quantum computing specialist is a growth company with a big new military contract — but a history of growing losses.
On Friday morning, IonQ (IONQ 19.05%) announced that it had landed a new quantum computing contract from the U.S. Air Force Research Lab. In response, the market bid the stock sharply higher. As of 10:42 a.m. ET, it had soared by 21%.
The $54.5 million award will see IonQ partner with the Air Force Research Lab “to design, develop, and deliver technology and hardware that enables the scaling, networking, and deployability of quantum systems” over the next four years.
What the Air Force wants from IonQ
IonQ’s press release was rather short on details about the contract, saying only that the Air Force Research Lab wants to integrate “quantum networking” with “existing telecommunications infrastructure,” and also make quantum systems interoperable with each other. The company was much more specific on how the deal helps it out financially.
“With a quarter remaining in the fiscal year, IonQ has announced $72.8 million in bookings year-to-date,” said the company, and it’s confident that it’s on course to meet or exceed its 2024 bookings guidance range of $75 million to $95 million. Assuming it succeeds, 2024 will be the third year in a row that IonQ has roughly doubled its bookings over the previous year.
And revenues are growing at closer to 225% per year.
Is IonQ stock a buy?
So the top line is growing nicely at IonQ. That’s a good thing, because it kind of needs to grow rapidly if the company is to have any hope of justifying its lofty current valuation of 53.5 times trailing revenue.
Meanwhile, IonQ has no profits at all. Indeed, IonQ lost three times more money in 2023 ($158 million) than it did in 2022 ($48 million). If analysts are correct, it will lose even more in 2024 ($173 million).
For that matter, analysts anticipate that losses will continue to rise (despite the sales growth) for at least the next two years before starting to come back down again. As far out as Wall Street forecasts go, no one sees IonQ earning any profit at all.
Suffice it to say that IonQ looks to me like a momentum stock — and a highly speculative one. Despite Friday’s good news, be cautious about buying into this momentum story.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.