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IonQ (IONQ) is one of the most high-profile names in the emerging quantum computing space, but not everyone is convinced about its long-term potential. Kerrisdale Capital, a well-known short-selling firm, recently released a scathing report on IonQ, calling it a “disaster in the making.” The report alleges that IonQ’s technology is vastly overhyped, that the company’s commercial traction is weak, and that its valuation is completely detached from reality. This has raised fresh questions for investors on how to approach this quantum computing leader.
In this article, we’ll dive into Kerrisdale Capital’s allegations, analyze IonQ’s financials, recent developments, and potential catalysts, and assess whether investors should side with the bears or if this quantum computing stock still has room to run. Let’s get started!
About IonQ Stock
IonQ (IONQ) is a notable player in the quantum computing industry, specializing in the development of general-purpose quantum computing systems. The company provides a cloud-agnostic end-to-end solution that supports every quantum language and SDK tool. IONQ also has strong partnerships with major technology firms such as Microsoft (MSFT), Amazon (AMZN), and Google (GOOGL), enabling businesses of all sizes to access IonQ’s quantum computers through popular cloud platforms like Azure, AWS, and Google Cloud. Its market cap currently stands at about $5.2 billion.
Shares of IONQ have slumped 44% on a year-to-date basis, weighed down by waning quantum computing hype and internal challenges.
Kerrisdale Capital Issues Short Report on IONQ Stock
On March 13, IONQ stock dropped more than 2% following the release of a short report by Kerrisdale Capital. The investment management firm published a detailed report questioning IonQ’s valuation, scalability challenges, and transparency with investors.
In a blog post on its website, Kerrisdale stated, “We are short shares of IonQ, a $5 billion quantum computing company whose stock has tripled in recent months as retail investors, chasing the ‘next AI’ trade, piled into an industry that has long been plagued by overpromises and hype.” The short seller pointed out that despite the stock retreating from its all-time high, it still trades at a “staggering” 40 times the consensus 2026 revenue estimate, a valuation the firm considers illogical.
Kerrisdale Capital’s report also cast doubt on IonQ’s ambitious growth forecasts and raised questions about the viability of its technology. Kerrisdale pointed out that, despite IonQ’s claims of achieving major technical and commercial milestones, the company is actually facing significant scalability challenges. The firm cited former IonQ employees who have highlighted “monumental” scaling challenges that could undermine the company’s ambitious plans. Notably, IonQ aims to expand its physical qubits from 80 to 100 to over 4,000 by 2026 and 32,000 by 2028. At the same time, the short seller believes that IonQ is far from entering a “new era of commercial success” due to its allegedly limited and error-prone systems.
Another key point in Kerrisdale’s report worth noting is the criticism of management’s lack of transparency. The report pointed out that former CEO Peter Chapman had a track record of making ambitious statements that often diverged from reality. It also underscored expert concerns regarding the disparity between IonQ’s perceived market reputation and its actual position within the industry.
The report ended with a strong warning to investors, describing IonQ as a “cash-burning, highly promotional company in a hot sector valued at absurd revenue multiples, with retail investors piling in and ignoring critical scaling challenge - even as the CEO unloads $37m worth of stock - are hallmarks of a disaster in the making.”
Recent News for IONQ Stock
On March 10, IonQ announced that it had sold 16,038,460 shares of its common stock through its “at-the-market” equity offering program, raising approximately $360 million in total. Obviously, this is a positive development for the company as it boosted its “pro forma year-end cash to over $700 million” to support its capital needs. During the Q4 earnings call, management said they plan to use the proceeds to accelerate the growth of the company’s networking business and create new growth avenues in promising application areas. The downside of this move is also evident, as equity dilution typically undermines investor confidence. As a result, IonQ’s stock ended the trading session with a more than 11% decline.
On March 4, IonQ announced that it had successfully delivered and installed a quantum networking system designed for research and development at the U.S. Air Force Research Laboratory (AFRL) in Rome, New York. The recently deployed on-premises technology features a dedicated quantum system using trapped ions, aimed at supporting the research goals of AFRL. This advanced system is expected to improve precision, flexibility, and scalability, significantly advancing quantum networking methodologies and algorithms.
How Did IonQ Perform in Q4?
On Feb. 27, IONQ stock sank over 16% after the company posted its fourth-quarter financial results. The drop came even after its revenues grew 91.8% year-over-year to $11.7 million, exceeding both the high end of the company’s guidance and Wall Street’s consensus. IonQ’s full-year revenues stood at $43.1 million, up 95% year-over-year. Notably, the company secured $22.7 million in bookings during Q4, bringing its total bookings for the year to $95.6 million, representing a year-over-year increase of over 46%. While these figures reflect impressive year-over-year growth, investors should remember that quantum computing is still far from generating significant revenues. This means that the company is likely to continue reporting losses for the foreseeable future.
Meanwhile, the company reported a substantial adjusted EBITDA loss of $32.8 million for the quarter, compared to a $20 million loss in the prior-year period. Its net loss per share widened to $0.93 from $0.20 in the year-ago quarter, missing expectations by $0.68.
Another concern for investors is the company’s substantial stock-based compensation, which has been diluting shareholder value. IonQ reported a staggering $106.9 million in SBC for 2024, a significant increase from $69.7 million in 2023. The base share count was 218 million in Q4, and it’s important to include an additional 16 million shares from the recent ATM offering to that figure. The fully diluted share count is expected to continue rising throughout 2025.
Looking ahead, management expects 2025 revenue to range from $75 million to $95 million, reflecting approximately 100% year-over-year growth at the midpoint. However, first-quarter revenue is projected to be between $7 million and $8 million, indicating a sequential decline. This is not an encouraging sign for a company aiming to achieve $1 billion in sales by 2030. Overall, the earnings report delivered several surprises, reminding investors that the path to $1 billion in revenue will be uneven and challenging, if achievable at all.
Analysts tracking the company expect its GAAP net loss to narrow by 49.36% year-over-year to $0.79 per share for 2025, while the top line is projected to double year-over-year to $85.42 million.
NVDA’s Quantum Day Could Serve as a Catalyst for IONQ Stock
Quantum computing industry watchers and investors are turning their attention to Nvidia’s first-ever Quantum Day at GTC on March 20, particularly after CEO Jensen Huang stated in January that quantum computing might not be “very useful” for 15 to 30 years. The event will feature discussions on quantum computing’s role in AI, commercialization challenges, and potential breakthroughs, with participation from executives at leading quantum firms including IonQ, Rigetti Computing (RGTI), and D-Wave Quantum (QBTS). Nvidia’s decision to host Quantum Day suggests that the company is revising its stance and recognizing the potential of quantum computing sooner rather than later.
With that, any positive news from the event could reignite the quantum computing rally and drive significant gains for the stocks of leading industry players. At the same time, if the event disappoints investors and analysts, it would not be surprising to see quantum computing stocks continue their recent slide.
Options Market Sentiment on IonQ Stock
Looking at the option chain for April 17, 2025, the $22.50 CALL option has a bid/ask spread of $3.20/$3.35, while the $22.50 PUT option displays a spread of $2.33/$2.47. Please note that this option strike is closest to the current stock price. Now, let’s determine the expected price movement using the midpoint prices of these options:
2.40 (22.50 put) + 3.28 (22.50 call) = 5.68/23.30 = 24.4%
Based on current prices, the options market suggests that IONQ stock could see a movement of approximately 24% by April’s options expiration from the $22.50 strike price using the long straddle strategy. That would place the stock in a trading range of $17.60 to $29.
Notably, at the $22.50 strike price, the open interest in call options (3,542) is nearly equal to that of put options (3,699), suggesting a neutral market sentiment. While predicting the stock’s direction is challenging in this case, investors should be aware that IONQ stock is likely to experience significant volatility in the coming weeks.
What Do Analysts Expect for IONQ Stock?
Wall Street analysts have a “Moderate Buy” consensus rating on IONQ stock. Among the six analysts offering recommendations for the stock, three rate it as a “Strong Buy,” one as a “Moderate Buy,” and two recommend holding. The average price target for IONQ stock is $42.17, indicating upside potential of 81% from current levels.
The Bottom Line on IonQ Stock
First of all, shorting IONQ may not be a wise strategy, given that the quantum computing industry is still in its early stages, and any positive development could send stocks soaring. I also believe investors should not place too much weight on the valuation concerns highlighted in the short report, as growth stocks frequently trade at high premiums - much like AI stocks did in 2024 and beyond.
What stood out the most were the scalability challenges highlighted in the report. Investors should keep this in mind when analyzing new earnings reports and news from the company. Moreover, investors should closely track the company’s progress toward its ambitious target of reaching $1 billion in sales by 2030.
In summary, I believe that quantum computing will eventually play a role in solving complex problems for human needs. However, at this stage, it remains a high-risk, high-reward investment, and the recent pullback in IONQ stock offers a compelling opportunity for risk-tolerant investors to bet on this emerging technology.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
