Is IonQ Stock a Buy Now?

Many tech stocks got a boost over the past year thanks to the rise of artificial intelligence. But AI isn't the only technology with transformative potential for society. The nascent field of quantum computing also opens up immense possibilities.

Quantum computers use subatomic particles to perform complex calculations at speeds beyond the abilities of conventional computers. That's why quantum computing company IonQ (NYSE: IONQ) saw its stock skyrocket to a 52-week high of $21.60 last year.

Since then, shares have steadily declined, reaching a 52-week low of $6.22 on Aug. 5 during the broader stock market's recent sell-off. Does the price drop signal an opportunity to pick up shares?

An answer to that question isn't straightforward, and also depends on your investment approach. Read on to learn the factors to consider when investing in IonQ.

IonQ's sales growth

IonQ possesses several attributes that make it an attractive investment, as demonstrated by the company's second-quarter earnings results.

For instance, IonQ grew Q2 revenue by 106% year over year, reaching $11.4 million. The firm expects its superb sales growth to continue in Q3, forecasting at least $9 million in revenue, up from the prior year's $6.1 million.

In addition, IonQ's Q2 balance sheet was excellent. Total assets were $517.4 million, with $369.8 million of that in cash, cash equivalents, and short-term investments. Total liabilities were $54.2 million.

The company's revenue growth is due to acquiring customers such as the Applied Research Laboratory for Intelligence and Security (ARLIS). ARLIS chose IonQ to develop a quantum computing system as part of the U.S. government's national security efforts.

Another example is the company's contract with the U.S. Naval Research Laboratory, which stated IonQ's systems were able to complete calculations that used to take months in just hours.

Additional customers include Hyundai , where IonQ is helping to develop self-driving cars, and Oak Ridge National Laboratory, which is using IonQ to assist in modernizing the U.S. power grid.

Other IonQ strengths and weaknesses

Its customer wins are thanks to IonQ's impressive technology. The firm uses ions trapped by lasers to produce simultaneous calculations, as opposed to the sequential method used by conventional computers. This is what enables quantum computers to perform at incredible speeds, and handle complex calculations that aren't possible with today's computers.

Moreover, IonQ's approach leads to lower computational errors compared to competitors, according to the company. Its systems are also accessible through major cloud computing businesses, providing convenience to customers.

Yet despite its successes, the company is not profitable. Its Q2 net loss totaled $37.6 million. Many tech companies operate at a loss for years as they sacrifice profit to grow their business as fast as possible, which is the case with IonQ.

The firm raised Q2 spending on research and development (R&D), from $19.9 million in 2023 to $31.2 million. This is a critical area for the company to invest in, given IonQ is building new technologies in the quantum computing field.

It also increased spending on sales and marketing as it works to acquire more customers. This expense rose to $6.1 million in Q2, up from $3.6 million in the year prior. The cost makes sense, since IonQ needs sales and marketing to drive business growth.

After all, IonQ's technological and customer successes are what make the company a compelling investment. In fact, the consensus among Wall Street analysts is an overweight rating , with a median price target of $10 for IonQ shares, suggesting their belief the stock will go up.

Why investing in IonQ stock is a challenging decision

Given the many positives, what about IonQ makes it a difficult investing decision? A key reason is that the entire quantum computing industry is still in its infancy. There's no telling if IonQ's technology will be the one preferred by customers over the long run, making an investment in the stock highly speculative.

Another factor to consider is IonQ's brief life as a public company. Its IPO occurred in 2021. IonQ's limited public history makes it difficult to gauge how it can perform over the years as the quantum computing industry evolves.

These factors contribute to IonQ stock experiencing a lot of volatility. This is evidenced by its high beta of more than 2.

As its beta indicates, IonQ shares are particularly sensitive to the performance of the broader stock market. So when the market experienced a sell-off this month, IonQ stock was particularly hard hit.

Of course, the opposite can happen as well. With the potential for the Federal Reserve to cut interest rates in the future, IonQ stock could be poised for an upswing.

Because IonQ shares suffer from high volatility, investing in the stock is not for the faint of heart. This is where your investing approach comes into play. You should only consider buying IonQ shares if you find growth stocks appealing, and even then, only if you have a high risk tolerance .

Robert Izquierdo has positions in IonQ. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .