Thanks to the rise of artificial intelligence, many technology stocks have seen a surge in the past year. But AI is not the only technology with transformative potential for society. The emerging field of quantum computing also opens up enormous opportunities.

Quantum computers use subatomic particles to perform complex calculations at speeds that outpace conventional computers. That is why the quantum computer company IonQ (IONQ 0.96%) saw its shares rise rapidly over the past year to a 52-week high of $21.60.

Since then, share prices have fallen steadily, reaching a 52-week low of $6.22 on August 5 during the latest stock market sell-off. Is the price drop an opportunity to buy shares?

The answer to this question is not clear-cut and also depends on your investment approach. Read on to learn what factors to consider when investing in IonQ.

IonQ sales growth

As the company’s second-quarter results show, IonQ has several characteristics that make it an attractive investment.

IonQ was able to increase its revenue in the second quarter by 106% year-over-year, reaching $11.4 million. The company expects its excellent revenue growth to continue in the third quarter and forecasts revenue of at least $9 million, an increase from last year’s $6.1 million.

In addition, IonQ’s balance sheet was excellent in the second quarter. Total assets were $517.4 million, including $369.8 million in cash, cash equivalents and short-term investments. Total liabilities were $54.2 million.

The company’s revenue growth is due to the addition of customers such as the Applied Research Laboratory for Intelligence and Security (ARLIS). ARLIS commissioned 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 US Naval Research Laboratory, which states that IonQ’s systems could perform calculations that previously took months in just a few hours.

Other customers are Hyundaiwhere IonQ is helping develop self-driving cars, and Oak Ridge National Laboratory, which is using IonQ to modernize the U.S. power grid.

Further strengths and weaknesses of IonQ

IonQ has been winning customers thanks to its impressive technology. The company uses ions captured by lasers to perform simultaneous calculations, as opposed to the sequential method used by traditional computers. This allows quantum computers to operate at incredible speeds and perform complex calculations that are not possible with today’s computers.

In addition, IonQ’s approach results in fewer calculation errors compared to its competitors, according to the company. The systems are also accessible through major cloud computing companies, which offers convenience to customers.

But despite its success, the company is not profitable. Its net loss in the second quarter was $37.6 million. Many technology companies are loss-making for years because they forego profits in order to grow their business as quickly as possible, and IonQ is no exception.

The company increased research and development (R&D) spending in the second quarter to $31.2 million from $19.9 million in 2023. This is an important area of ​​investment for the company as IonQ develops new technologies in the field of quantum computing.

It also increased sales and marketing expenses to attract more customers. These costs rose to $6.1 million in the second quarter, up from $3.6 million a year ago. The costs make sense because IonQ needs sales and marketing to drive company growth.

Ultimately, it is IonQ’s technological and customer-related successes that make the company an attractive investment. In fact, the consensus among Wall Street analysts is to overweight IonQ shares and aim for a median price target of $10, which suggests they expect the stock to rise.

Why investing in IonQ shares is a difficult decision

Given the many positives, what makes IonQ a difficult investment decision? A major reason is that the entire quantum computing industry is still in its infancy. There is no telling whether IonQ’s technology will be the one preferred by customers in the long term, making an investment in the stock highly speculative.

Another factor to consider is IonQ’s short existence as a publicly traded company, having gone public in 2021. IonQ’s limited stock market history makes it difficult to estimate how the company will perform over the years as the quantum computing industry evolves.

These factors contribute to IonQ stock being highly volatile, as evidenced by its high beta of over 2.

As the beta shows, IonQ shares are particularly sensitive to the performance of the broader stock market, so when the market sold off this month, IonQ shares were hit particularly hard.

Of course, the opposite can also happen. Given the possibility of a future rate cut by the Federal Reserve, IonQ stock could be on the verge of a rebound.

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