IonQ (IONQ) Closes SkyWater Deal, Is The Upside Already Priced In?

IonQ (IONQ) shares climbed about 9% after the company closed its roughly US$1.8 billion acquisition of SkyWater Technology, a US-based semiconductor foundry that will now operate as an IonQ subsidiary.

See our latest analysis for IonQ.

The SkyWater deal arrives during a mixed period for IonQ’s stock, with a 7 day share price return of 10.96% but a 30 day share price return that is down 29.11%. Over longer horizons, total shareholder return sits slightly lower over 1 year at a decline of 4.41%, but remains very large over 3 and 5 years. This points to momentum that has cooled recently even as interest in quantum computing headlines stays high.

If this move has you looking beyond IonQ, it could be a good moment to widen your watchlist and check out 26 quantum computing stocks

After a sharp rebound and with the SkyWater deal now closed, the key issue for IonQ investors is simple. Has most of the easy upside already played out, or does the current valuation still leave meaningful room ahead?

Most Popular Narrative: 24.1% Undervalued

IonQ’s most followed narrative assigns a fair value of $48.00 per share, compared with the last close of $36.44. That gap is what the current debate turns on.

The biggest update is that IonQ’s latest quarter reinforced its position as the most commercially scaled of the public quantum names. The company said Q1 revenue exceeded the midpoint of guidance by 30%, and Reuters reported that the raise in guidance reflected increasing demand for its platform. That matters because revenue scale is one of the few hard ways to separate the better quantum equities from the more conceptual ones.

Read the complete narrative.

Want to understand why this narrative still sees upside in IonQ at a premium stock price? It leans heavily on accelerating revenue, ambitious platform expansion and a confident profit profile that assumes meaningful progress from here.

According to HedgeY, the narrative rests on IonQ already crossing $100 million of annual revenue, guiding to a much higher top line, and targeting a broad quantum platform that spans computing, networking, sensing and manufacturing. It also assumes that a very large cash balance and sizeable contracted backlog help support a premium market value despite the company still prioritizing growth over earnings.

Result: Fair Value of $48.00 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, IonQ’s premium stock price and continued losses mean that any stumble in technology progress or acquisition integration could quickly challenge this undervalued narrative.

Find out about the key risks to this IonQ narrative.

Another View On IonQ’s Valuation

Our SWS DCF model paints a very different picture for IonQ. At a last close of $36.44, the stock sits above an estimated future cash flow value of $7.52, which screens as expensive. That challenges the 24.1% undervalued narrative and raises a simple question: Which set of assumptions do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Next Steps

If this mix of optimism and concern around IonQ feels familiar, treat it as a prompt to review the current data and form your own view using the 2 key rewards and 4 important warning signs.

Looking for more investment ideas beyond IonQ?

If IonQ has sharpened your focus, do not stop here. Use the Simply Wall Street Screener to uncover fresh opportunities that fit your own investing checklist.

• Target potential mispricings by scanning the market for companies that look attractively valued through the 55 high quality undervalued stocks.
• Prioritise resilience by reviewing stocks that show stronger financial footing using the solid balance sheet and fundamentals stocks screener (45 results).
• Unearth lesser known opportunities by checking the screener containing 19 high quality undiscovered gems before they land on everyone else's radar.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.