Take Some Profits After IonQ’s Q3 Earnings Report

Stocks to sell

IonQ (NYSE:IONQ) has been on a run. IONQ stock doubled in November. Heading into the company’s third-quarter results, it appeared that the stock’s momentum might dampen a bit following the earnings release.

quantum computing stocks: A 3D rendering of a quantum computing processor.

Source: Shutterstock

The company announced its quarterly results on Nov. 15. Not surprisingly, given its startup status, IonQ generated a mere $223,000 of revenue over the past three months. Meanwhile, it lost $14.8 million from its operations while posting negative $7.9 million of EBITDA, excluding certain items. Those were not great numbers, and the  shares initially traded down around 5% following the report.

However, the company’s  total contract bookings exceeded $15 million, indicating that its revenue can climb in the future as its business continues to grow. It also had $587 million of cash on hand as of the end of September, meaning that it can support its growth  for many years even as it continues to report operating losses. IONQ stock  reserved course starting on Tuesday, soaring more than 25% following its initial post-earnings dip.

Now, to be clear, we knew that quantum computing wasn’t going to take off overnight. We’re still in the first inning of attempts to commercialize the technology. However, IonQ is arguably the industry leader, as its solution is already offered on all the major cloud computing platforms, and it has optimized its hardware to run on all the major, available quantum computing software.

So while IonQ is still just getting started in terms of revenue, it has a significant first-mover advantage in terms of technology.

Peter Chapman’s Vision

IonQ is driven by the inspiration of its CEO, Peter Chapman. According to a recent interview, Chapman became fascinated with the sort of artificial intelligence (AI)-powered machines that appeared in science fiction movies in the 1970s.

However, 45 years ago, computers weren’t remotely close to being able to use AI.

So Chapman went into other fields. He founded a gaming company, Level Systems, that made video games based on popular movies such as Indiana Jones and Star Trek. He also worked on building computer tools for the blind and sold another firm to Thomas Financial.

More recently, Chapman looked into using cloud computing to build an AI system. But the cloud still didn’t have enough computing power. So he instead went to work for Amazon (NASDAQ:AMZN) and oversaw  delivery fulfillment for its Prime members.

In 2019, however, he jumped to IonQ. In quantum computing, Chapman says, he has finally found the sort of tools necessary to build the advanced AI systems that he’s dreamed about since his youth. So for Chapman, IonQ is both a way to fulfill a lifelong passion, while also helping drive humanity forward.

Quantum computing isn’t just for making talking robots, after all. Experts forecast that quantum computing could help scientists reach breakthroughs in computational chemistry, pharmaceutical research, and weather forecasting, among many other fields.

Not an Overnight Story

The story of how Chapman came to oversee IonQ is fascinating for multiple reasons. For one, the CEO is more driven to succeed than the average hired hand, since he’s bought in to the technology to fulfill a lifelong goal of his. And secondly, Chapman’s long wait is indicative of the patience that investors will need to have with IONQ stock.

Quantum computing is a technology that Chapman has been dreaming about for decades. It’s not something that emerged overnight, nor will IonQ suddenly become the next Amazon in a year or two. Changing the way we compute is a fundamental sea change will take many years, if broad adoption ultimately ends up occurring at all.

If investors assess IonQ based on its near-term revenues, they’re bound to be disappointed. Make sure you understand what you’re investing in; the company is a long-term play through and through.

The Verdict on IONQ Stock

IonQ is one of the most fascinating publicly-traded companies out there today. I’m optimistic about the long-term possibilities of quantum computing in general and IonQ in particular. Not too long ago, in fact, I wrote an article highlighting the merits of a potential investment in IONQ stock.

Since that point, however, the shares have already moved up from $11 to $27.50. Has the company done anything to justify that gain which took place in the span of a month? No, not really. This is a story that will likely take a decade or more to fully play out.

Don’t be afraid to trade some of your shares of IONQ stock if you own it. There will be plenty of volatility along the way, and these sorts of euphoric rallies can quickly fizzle out. Like Chapman, investors should have patience if they want to win the quantum computing prize.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Articles You May Like

Cathie Wood says her ‘volatile’ ARK Innovation fund shouldn’t be a ‘huge slice of any portfolio’
Snowflake’s stock flies higher as software company’s outlook impresses
Autonomous Vehicles: Why 2025 Will Usher in the Self-Driving Car
Stock-market investors cheered end of election uncertainty. Policy uncertainty remains.
Acurx Pharmaceuticals to add up to $1 million in bitcoin for treasury reserve, following MicroStrategy’s playbook