Prediction: Here's What a $1,000 Investment in IonQ Stock Could Be Worth in 5 Years

IonQ (NYSE: IONQ) is a leader among the pure-play quantum computing cohort -- and for good reason. It looks much more like a real business than some of its peers, and if it can successfully deliver on its promise, its upside could be significant.

But an exciting young technology doesn't automatically make for a good investment, especially when so much of its promise remains unproven.

So, what might a $1,000 investment in IonQ stock made today be worth five years from now? Let's take a look.

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Quantum computing's promise faces serious engineering challenges

The smartphone or laptop you're reading this on stores and processes information using bits -- 0s and 1s. Quantum computers process data with "qubits" -- quantum bits that are governed by deeper and more counter-intuitive physical laws than we deal with in our everyday lives.

Qubits can temporarily exist in "superposition," holding states that are neither 1 nor 0, but complex probability amplitudes. I won't try to explain that further -- but suffice it to say that this means that quantum computers perform calculations in a fundamentally different way from traditional ones. That difference will allow them to solve problems that are either extremely difficult or impossible for a classical supercomputer to handle in any useful amount of time.

The expectation is that this could lead to breakthroughs in materials science, drug development, and logistics, among many other fields.

In short, the ability of qubits to behave in ways that ordinary bits don't could be a very big deal.

But this technology is mostly still unproven, at least on any scale that matters. Qubits are hard to get a handle on, and they are extremely sensitive to any outside interference, which makes quantum computers prone to errors. Every player in the space is highly focused on the problems of error mitigation and error prevention.

There's also a question of scale: Building a system with enough qubits operating together to be useful, and also getting them to perform reliably, is a serious engineering challenge.

Of course, the potential payoff is huge -- much bigger than just "a faster computer" -- which is a common misconception. Real, practical quantum computing could help us solve currently unsolvable problems and would represent a massive leap forward in human technology.

How IonQ's trapped-ion quantum computers work

There are numerous ways to make a qubit, and it's far from clear at this point which versions of the technology will deliver most effectively.

IonQ builds its systems around trapped-ion qubits. It uses electromagnetic fields to "trap" individual electrically charged atoms (ions) in place in a vacuum, and then uses lasers to cool and manipulate them. This approach has the major advantage of making the qubits highly stable -- at least relatively. The downside is that it is generally harder to scale than some other approaches.

IonQ's revenue is growing, but losses remain steep

Though the technology is still a long way from maturity or real commercial viability, IonQ already has a business. Sales reached $80.1 million in the second quarter, up 287% from a year earlier.

The company sells its early quantum computers and rents access to them via the cloud, but they have real limitations and are largely only useful for research at this point. After a string of acquisitions, the company now also sells quantum networking, security, and sensing equipment, along with space-grade hardware.

Its largest acquisition just closed in July: chip manufacturer SkyWater Technology. That deal helped boost its full-year revenue forecast by about $170 million to between $450 million and $460 million.

Of course, the top line is only half the picture. IonQ's operating loss reached $337 million in Q2, far exceeding its sales. It does have a strong balance sheet, however, with about $2 billion in cash and investments left over after the SkyWater acquisition.

What could IonQ stock be worth in 2031?

So what could IonQ look like five years from now?

A bullish scenario

• IonQ makes real progress, and its systems are starting to be used in real-world work.
• Demand grows across its product lines.
• Sales grow at 50% annually, reaching $3.5 billion in 2031.
• The company is closer to profitability but continues to operate in the red as it scales.

A bearish scenario

• Its quantum computers are still mostly relegated to research and experimentation.
• Sales of its other product lines grow, but at a much slower pace.
• Revenues grow at 15% annually, reaching $915 million in 2031.
• The company is still operating deep in the red, and management uses dilutive stock sales to cover the funding gap.

I suspect that practical quantum computing is still much further off than the bullish scenario assumes, and I see IonQ looking more like the latter case five years from now. And in this scenario, I think investors won't be willing to pay the same sort of multiple they are now.

And that multiple is already an issue. Even after a stock price decline of more than 50% from the 52-week peak it hit early this summer, IonQ is trading at a lofty price-to-sales (P/S) ratio of more than 45.

Assuming a more bearish case prevails, I'd expect that to contract to maybe 10 times sales.

In that case, accounting for further dilution from likely stock sales, I think IonQ shares will be worth about $15 five years from now, which means a $1,000 investment made today would be worth just $487.

Of course, I could be very wrong. Quantum computing tech could progress much faster than I believe. But people have been claiming that useful quantum computers would be here in just a few years for the past decade or two.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.