That hasn’t deterred one leading broker, though, which this week slapped a huge price target on the current leading quantum computing stock.

Let’s take a closer look to see if this offers a buying opportunity for my Stocks and Shares ISA.

$100 target

The Wall Street broker in question is Jefferies and the stock is IonQ (NYSE:IONQ). Jefferies is super-bullish and initiated coverage with a Buy rating and $100 price target.

That’s a whopping 113% above the current share price of $47!

IonQ is a leader in trapped-ion quantum computing. Without getting into the weeds, these systems don’t need the ultra-cold deep-freeze that other quantum computers require. And that could give the firm a significant scaling advantage.

Jefferies thinks the company’s trapped-ion architecture offers superior coherence and fidelity (lower error rates) compared to competing technologies. And it highlights how IonQ is moving from pure computing research into real-world applications.

Aggressive roadmap

This all sounds very promising, but investors need to take a leap of faith by looking out to what might come in 2030. By then, IonQ reckons its machines could support 80,000 logical qubits.

Put simply, that’s how many useful and reliable qubits the machine could run a complex algorithm on. And this level of quantum computing power would presumably unlock massive commercial use cases across multiple industries.

For context, IonQ aims for approximately 800 logical qubits by 2027. This shows how ambitious the firm’s technological roadmap is. 

What about revenue growth?

In 2025, IonQ’s revenue is expected to jump more than 150% to around $108m. Then another 78% to nearly $200m, and potentially $1bn+ by 2030.

Clearly then, this is a high-flying company in a potentially revolutionary industry. So, with the stock down 43% since October, should I snap it up for my portfolio?

My move

Unfortunately, IonQ looks too pricey to me today, with its $16.5bn market cap. It puts the stock on 153 times 2025’s expected sales.

Meanwhile, profits are expected to take a backseat for some time, as the firm invests in the significant commercial opportunity ahead. In Q3, the net loss was $1.1bn!

The company recently raised $2bn, bringing its cash position to $3.5bn. However, due to ongoing losses, further cash might be needed, potentially diluting shareholders.

Another concern I have is whether IonQ’s quantum computing approach is really far superior to rivals. Will it really scale up rapidly and reach huge commercial scale (as the valuation suggests)?

With the industry still largely in research and development mode, I still find it impossible to say whether IonQ will emerge as a huge winner.

That said, quantum computing is an industry that I find fascinating. I would like to find a way to invest in its explosive potential, without taking on excessive risk by paying 153 times sales.

IonQ could be a future buy for my ISA portfolio, but its price would have to drop a lot first.

The post This quantum computing growth stock could skyrocket 113%, says 1 broker appeared first on The Motley Fool UK.

Eagle-eyed investors who got in at around $3 back then could be sitting on a seven-figure goldmine. As I type now though, the IonQ share price is up at $69.

Might it still make me rich investing today? Here’s my take.

Rapid growth

Let’s start with some things I like about IonQ. Firstly, it’s a pioneer in the field of quantum computing, a technology which most experts say has the potential to completely revolutionise multiple industries.

Unlike traditional computers, which process information one step at a time (even if very fast), quantum computers use qubits. These can be 0 and 1 at once, allowing quantum computers to take on problems that classical machines would take centuries to crack. Hence the revolutionary potential.

IonQ builds quantum computers and offers access to them via the cloud (Quantum-as-a-Service). So researchers can run quantum workloads on IonQ hardware through cloud platforms.

Another thing I like here is that the company is already generating revenue, and this is growing rapidly. For 2025, revenue is expected to increase 112% to $91.3m, then nearly double again next year to around $171m.

Also, after a recent $1bn equity raise, the firm has about $1.6bn in cash on the balance sheet. So it’s well capitalised to both invest for growth and carry out acquisitions.

In Q2, IonQ snapped up three firms in its quest to build the backbone of a global quantum network.

Overall, there’s a lot to be excited about here. As the nascent quantum computer market takes off over the next decade, IonQ’s revenue could grow exponentially. Some investors see similarities with an early Nvidia (an exciting prospect indeed).

Reality check

Stepping back, though, I do see some things that give me cause for concern. The first is that quantum computers seem a few years from going totally mainstream because they are still prone to errors.

Moreover, I don’t really understand the company’s technology, if I’m honest. Now, that’s not to say that I think you have to understand every single aspect of a company’s technology before investing. For example, the inner workings of Nvidia’s GPUs or Rolls-Royce‘s small modular reactors. 

But IonQ uses trapped ions (charged atoms) as qubits. These are held in place by electromagnetic fields and manipulated with lasers. This is different to competitors like Google and IBM, which use superconducting qubits.

Which approach is superior? Why have Google and IBM — tech giants with vast intellectual and financial capabilities — gone down the superconducting route? These are questions I cannot answer. So I’m unsure whether IonQ has a durable competitive advantage.

A third issue I have is that the company is expected to be loss-making for some time. That’s not surprising given the emerging nature of the industry and the heavy investments needed to capitalise on the growth opportunity. But in a market downturn, these stocks are very vulnerable to massive selling pressure.

This is especially the case when IonQ is trading at 245 times this year’s forecast sales. At this valuation, I think the stock is currently in a speculative bubble rather than a potential millionaire-maker.

As such, I will focus on other opportunities for my portfolio.

The post Is IonQ a millionaire-maker growth stock? appeared first on The Motley Fool UK.

These include digital payments (Visa), online shopping (Shopify and MercadoLibre), artificial intelligence (AI) (Nvidia and Taiwan Semiconductor), cybersecurity (CrowdStrike), and international travel (Rolls-Royce and InterContinental Hotels).

Perhaps the next big one — which some think could be more impactful than the internet and smartphones — is quantum computing. These machines could turbocharge drug discovery, AI systems, and develop theoretically unbreakable quantum encryption.

Projections vary on how large this market might become. According to McKinsey, it could be $173bn by 2040. Boston Consulting Group goes higher, saying quantum computers will create up to $850bn of global economic value by then.

Either way, this market’s expected to be far larger than today. And while 2040 might sound miles off, it’s actually just 14.5 years away!

So should I buy quantum computing stocks in my ISA to ride this coming mega-trend? Let’s explore.

What is quantum computing?

IBM describes this technology as “an emergent field of cutting-edge computer science harnessing the unique qualities of quantum mechanics to solve problems beyond the ability of even the most powerful classical computers“.

Note the word “emergent“. In other words, no commercially useful quantum computers exist yet. They’re still prone to errors and much more research is needed before they’ll start changing the world.

The basic buildings blocks of these computers are called qubits (or quantum bits). Many experts reckon a really useful one will need at least 1m qubits. The most advanced quantum computers today have far less than that.

That said, rapid progress is being made. One Google executive working in this area reckons the industry could be “about five years” away from a game-changing breakthrough.

IonQ

Despite this, there’s a small handful of pureplay quantum computing stocks in the market today. These include IonQ (NYSE: IONQ), D-Wave Quantum, and Rigetti Computing.

As we can see, IonQ’s the largest, with a market-cap of $8.7bn. The company develops both physical quantum processors and the software needed to operate them. Customers can rent access to its quantum systems via cloud platforms such as Amazon Web Services (AWS).

Last year, IonQ’s revenue jumped 95% to $43.1m, and it’s expected to increase another 97% this year. So this is a fast-growing company tapping into early demand for experimentation, research, and quantum infrastructure-building.

Naturally, profits aren’t expected for years, which adds a lot of risk. But the firm did have nearly $700m in cash at the end of March, which will last more than three years at the current cash burn rate ($32m loss in Q1).

My problem here is that the stock’s trading at around 200 times sales after rising 350% in eight months. That’s an extreme valuation for a company that might not end up being a winner in this space.

Meanwhile, it faces formidable competition from deep-pocketed tech giants such as IBM, Google/Alphabet, and perhaps one day Nvidia.

IonQ and the other quantum computing stocks listed above are too speculative for my liking. For investors wanting some exposure to quantum computing, I think established firms including Alphabet, Amazon and Nvidia are currently the best plays to consider.

The post $850bn by 2040! Should I buy quantum computing stocks for my Stocks and Shares ISA? appeared first on The Motley Fool UK.

While I found a handful of candidates, these two didn’t make the cut.

AppLovin

The first is AppLovin (NASDAQ: APP), whose shares soared over 700% last year. However, they’ve crashed 46% since Valentine’s Day. That was a heart-wrenching plunge for shareholders, although the stock is still nearly 300% higher than this time last year!

AppLovin develops adtech software for mobile app developers, helping them monetise their applications. Last year, revenue jumped 43% to $4.71bn, while net profit skyrocketed 343% to $1.58bn.

This profit surge was driven by its AI engine, AXON, which significantly boosted ad targeting performance. It’s also expanded beyond mobile games into e-commerce ads. 

Why the price fall?

However, three separate reports from short sellers in a month have hammered the price. The most recent one from Muddy Waters claimed AppLovin may have been secretly pulling user ID data from platforms like Google, Facebook, Snapchat, and TikTok, potentially violating terms of service. This echoed previous reports that accused the firm of fraudulent activities.

Fuzzy Panda (one of the other short sellers) wrote to the S&P 500 inclusion committee in a bid to keep the company out of the index. It said: “AppLovin’s recent revenue growth has been based in data theft, revenue fraud, and the exploitation of our country’s laws protecting children.”

Now, AppLovin strongly denies these allegations. CEO Adam Foroughi wrote: “The reports are littered with inaccuracies and false assertions.” And inclusion in the S&P 500 might boost AppLovin’s valuation — not what short sellers want, as they stand to benefit when the stock falls.

If it transpires that the company has done nothing wrong, the share price could rebound strongly. Analysts still expect net profit to rise 39% this year. However, given the uncertainty surrounding the business model here, I’m avoiding AppLovin shares.

IonQ

The second stock is IonQ (NYSE: IONQ). This one has also been on a wild ride, soaring 1,200% between early 2023 and the end of 2024, only to plunge 45% this year.

IonQ is focused on developing general-purpose quantum computers and supporting infrastructure. Its technology is accessible through cloud platforms like Amazon Web Services, Microsoft Azure, and Google Cloud, allowing users to experiment and apply quantum computing in their respective fields. 

Quantum computers use the rules of quantum physics to process information in a totally different way from regular computers. If fully realised, they could revolutionise everything from medicine and materials science to cryptography.

IonQ’s revenue surged 95% last year to $43.1m, exceeding its own guidance. Wall Street expects that to nearly double this year, so this is a high-growth stock, for sure. However, profits aren’t expected for years and the price-to-sales multiple is a sky-high 113.

Meanwhile, it faces daunting competition from deep-pocketed tech giants like IBM, Google, and Microsoft. Even AI chip king Nvidia is now entering the quantum computing research space.

IonQ is a fascinating stock, but it’s very speculative. For me, it’s far too early to start picking winners in the quantum space.

The post 2 growth stocks I’m giving a wide berth in April appeared first on The Motley Fool UK.

Google’s revolutionary quantum processor has demonstrated the ability to solve complex problems in minutes — problems that would take traditional supercomputers 10 septillion years to complete. It’s something of a breakthrough for quantum technologies, given its exponential error reduction capabilities. If you’re interested and have institutional access, you can read more here.

Quantum theory has existed for over 100 years, but we appear to be approaching a commercial breakthrough. So, could quantum computing stocks make me rich?

Who operates in this space?

There are plenty of options for investors looking to gain exposure to quantum computing. There are pure plays like IonQ (NYSE:IONQ) or big tech companies like Google. We can also gain exposure through private capital raises. With 39 quantum startups in the UK, I’d expect to see one on a crowd funding-type website soon.

Some publicly listed opportunities include:

1. Google (Alphabet Inc.) — creator of the Willow chip
2. IBM — long-standing player in quantum computing research and development
3. IonQ — pure-play quantum computing company
4. Rigetti Computing — focused on superconducting qubit technology
5. Nvidia — collaborating with quantum companies to accelerate development
6. Oxford Instruments – UK-based company providing essential hardware for quantum systems

It’s a broad playing field. Companies like IBM are working on hybrid systems that combine classical and quantum computing for real-world applications, while Google’s latest development represent progress toward fault-tolerant quantum computers. Meanwhile, firms like Oxford Instruments provide critical infrastructure for this burgeoning industry.

However, investors should be wary that quantum computing is still in its infancy regardless of the transformative potential across industries like healthcare, finance, and logistics. The technology remains speculative, requiring significant time and capital before achieving widespread adoption. In fact, several quantum pure play stocks like Rigetti were floundering before the recent interest — the stock is now up 600% over two months.

Spotlight: IonQ

For investors seeking exposure to this cutting-edge field, IonQ is an intriguing opportunity. I added this pure play to my quantum computing watchlist in September — but didn’t buy. It’s up almost 400% since then.

These incredible returns can be attributed to a series of strategic moves and partnerships, including ones with Microsoft Azure and Amazon Web Services, making its quantum solutions accessible to a broader audience.

Moreover, in November, IonQ acquired Qubitekk, a quantum networking company credited with developing the first US commercial quantum network, thus strengthening its capabilities in quantum communications, an important aspect of future quantum computing infrastructure.

However, while this trapped-ion quantum company expects to record between $75m and $95m in quantum computing development contracts by the end of 2024, it’s getting very expensive. In fact, it currently trades with a forward enterprise value-to-sales ratio of 146 times.

Personally, despite the meteoric rise we’ve seen in some quantum stocks over the autumn, I do believe there are pockets of value — maybe even the next multibagger — to be found. I just haven’t worked out which stock that might be.

With the industry expected to grow by up to 40 times by 2040, a well-placed investment could indeed make me rich.

The post These quantum computing growth stocks could make me rich! appeared first on The Motley Fool UK.

But Nvidia’s unlikely to make everyday investors rich from today’s starting point. That’s because while its cutting-edge chips are needed to train and run artificial intelligence (AI) systems, Nvidia now has a mind-boggling $3.6trn market cap.

This makes it the world’s largest firm.

Moreover, the company faces increasing competition from its own cloud platform customers, who are developing AI chips in-house.

Therefore, investors looking for the potential ‘next big thing’ might want to consider quantum computing.

A new mode of computation

If quantum computing sounds difficult to comprehend, that’s because it is (or at least it is for me).

As I see it though, it’s like regular computing on steroids. Instead of using boring old 1s and 0s (bits), these computers use qubits that can be 1, 0, or both at the same time.

Confused? Yeah me too, a bit (no pun intended).

Yet most tech giants are pouring money into this area, including Alphabet‘s Google and Nvidia. And it’s easy to see why, given some of the potential use cases for this disruptive technology:

• In drug discovery, there could be rapid breakthroughs in diseases like cancer or Alzheimer’s.
• Design of new materials with superior properties (that is, stronger or lighter).
• Quantum computers could crack traditional encryption methods in seconds, rendering current cybersecurity obsolete.

The stock in question

Unfortunately, most start-ups in this emerging industry are yet to go public. But one fascinating exception is IonQ (NYSE: IONQ), which currently has a $7bn market cap (the same as Nvidia had in late 2010).

The stock has skyrocketed 850% since the start of 2023.

Good commercial progress

Quantum computers are going to have their ChatGPT moment.

IonQ CEO Peter Chapman

The company offers cloud-based access to its quantum computers through platforms like Amazon Braket and Microsoft Azure Quantum. Customers can pay for access to these resources to run their own algorithms and experiments.

IonQ also signs research partnerships. In Q3, it partnered with AstraZeneca to accelerate drug discovery and development, as well as software firm Ansys. It’s also working with Hyundai on self-driving cars.

Quarterly revenue surged 102% year on year to $12.4m, prompting management to raise full-year guidance to between $38.5m and $42.5m. And it expects full-year bookings of $75m to $95m.

Unsurprisingly, IonQ is still loss-making, which adds risk here. It expects an EBITDA loss of about $110m in 2024.

However, it had $383m in cash at the end of September. That’s a cash runway of about three years at the current rate, suggesting it’s well-funded.

Very speculative

Quantum computers aren’t widely used yet because they’re hard to scale and prone to errors. But they’re expected to create up to $850bn in economic value by 2040.

IonQ’s quantum computers use trapped ions as qubits, but competing approaches exist. My concern is that a rival technological breakthrough could render the company’s method obsolete.

Basically, I can’t judge whether IonQ has a durable competitive advantage. And this makes it very difficult to assess whether it has Nvidia-like potential.

With the stock trading at an eye-watering 177 times this year’s forecast sales, I’m putting it in the too-hard category for now. I’m not buying.

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