Is IonQ a Buy?

Thanks to its soaring stock last year, quantum computing specialist IonQ (NYSE: IONQ) is a company that has people talking. Up more than 225% in 2024, the shares have clearly attracted a ton of interest from investors. But it's a new year, and the question is this: Is IonQ a long-term buy? Let's dig into that right now.

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What does IonQ do?

First off, let's understand what IonQ does, and why it is attracting so much interest from investors. In a nutshell, IonQ is a quantum computing business. Here's how the company describes its business model in its 2023 annual report:

We are developing quantum computers designed to solve some of the world's most complex problems, and transform business, society and the planet for the better. ... Today, we sell specialized quantum computing hardware together with related maintenance and support ... and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities. We currently make access to our quantum computers available via three major cloud platforms, Amazon Web Services' ("AWS") Amazon Braket, Microsoft's Azure Quantum and [Alphabet parent] Google's Cloud Marketplace, and also to select customers via our own cloud service.

So, IonQ generates revenue through the sale of quantum computer hardware -- or access to it. But what is a quantum computer? In short, it's a much improved and much faster version of today's computers. Without getting too far into the technical details of how they work, quantum computers operate on a more advanced architecture that permits much quicker computation and calculation than traditional computers.

However, there is a catch. Due to their architecture, quantum computers are notoriously error-prone. Temperature fluctuations and electronic interference can disrupt their operations, damaging the hardware.

That makes it extremely difficult -- and costly -- to produce quantum computers at scale. However, if someone could develop a reliable and stable quantum computer, it could take the world by storm.

Problems that have proven too difficult to solve using traditional methods of computing could be solved, resulting in significant advances in healthcare, engineering, chemistry, and many other fields.

But is IonQ a solid investment?

Sure, there's plenty to be excited about, but that doesn't necessarily make IonQ a wise investment. To start with, let's make one thing clear: IonQ is a company that is still very early in its lifecycle. It has only reported $37 million in revenue over the last 12 months and has generated over $171 million in net losses over the same period.

What's more, the company has reported $120 million in negative free cash flow -- meaning it is burning through about $30 million in cash each quarter. Thankfully, IonQ has more than $365 million in cash on its balance sheet, giving the company some time before it must raise more cash through a debt or an equity offering.

At any rate, investors should understand the potential risks and rewards that come with owning IonQ stock. The rewards could be significant, particularly if the company continues to make progress through its research and development.

However, given the unproven nature of quantum computers and the current unprofitability of the company, investors should be aware that there are significant risks to owning the stock. In other words, IonQ stock isn't for everyone. Growth investors willing to speculate on a promising name in the sector may want to consider IonQ, but value investors and those who are more cautious may want to look elsewhere.

Should you invest $1,000 in IonQ right now?

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