Stock-Split Watch: Is IonQ Next?

Key Points

• IonQ is the most valuable pure-play quantum computing stock.

• It's surged over the last year as excitement over quantum computing has picked up.

• Revenue is still minimal, but management expects growth to improve this year.

• 10 stocks we like better than IonQ ›

Quantum computing stocks are getting a lot of attention these days, and it's easy to see why.

Following the boom in AI stocks over the last two years, investors are looking for the next emerging technology that can deliver monster returns. Quantum computing is starting to look like a good candidate, especially as the perception of its potential has changed significantly in recent months.

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Last December, Alphabet announced that it had achieved a new milestone in quantum computing with its Willow chip, which performed a computation in under 5 minutes that it said would take one of today's fastest supercomputers 10 septillion years to do.

Nvidia CEO Jensen Huang has also changed his stance on quantum computing after saying at the beginning of the year that "very useful" quantum computing was at least 15 years away. He later walked back those comments and said in June that the technology is "reaching an inflection point," boosting optimism.

As a result of the increasing bullish sentiment, quantum computing stocks have soared this year. Among them is IonQ (NYSE: IONQ), which is the biggest of four publicly traded quantum stocks: it, D-Wave Quantum, Rigetti Computing, and Quantum Computing.

Following the surge over the last year, IonQ's market cap has reached $13.5 billion. The stock has jumped more than 400%, and some investors are wondering if IonQ is now a candidate for a stock split, which would increase the number of shares while lowering the stock price, leaving it with the same market cap.

Image source: Getty Images.

Could IonQ's stock split?

Fast-growing stocks are often candidates for stock splits since most management teams want to keep the share price affordable for individual investors.

Stock splits don't change the fundamentals of a stock. They just lower the share price by creating more shares and dividing the pie into more pieces. But there is some evidence that stock splits are correlated with outperformance.

This could be because management chooses when to do a split when it reflects its own optimism in the growth of the business. The split can act as a signal to investors to buy the stock since some investors react positively to it. It also represents a milestone in the company's own growth.

However, IonQ's share price is only $46 right now. Typically, stocks split their share prices when they're in the triple digits, if not well into the triple-digits, or even above $1,000.

Given that the share price is only $46, a stock split is unlikely in the near future. Though if the stock keeps soaring as it has been, a stock split would be more likely.

Can IonQ keep gaining?

IonQ is the largest publicly traded pure-play quantum computing stock, but the business is still small. Revenue in the first quarter was flat at $7.6 million and it posted a loss of $32.3 million.

However, the stock has been bid up on its future potential rather than its current results, and it is making progress in its growth strategy. In the first quarter, the company announced a $22 million joint venture to build a new quantum innovation center in Tennessee with EPB.

The company also participated in Nvidia's first-ever Quantum Day, sharing demonstrations of quantum-accelerated computation, including a blood-pump simulation based on quantum-processed data, achieving results that were 12% faster than traditional computing.

IonQ's guidance also calls for revenue growth to accelerate. It sees $16 million-$18 million in revenue in the second quarter, and $75 million-$95 million for the full year, implying $55 million-$72 million in revenue in the second half of the year. That shows the business is starting to gain meaningful traction.

High expectations are clearly baked into the stock. IonQ could continue to move higher if it can meet or beat that guidance and if the broader bullish sentiment remains.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.