IonQ, Inc. (IONQ) has been one of the most popular stocks among Zacks.com visitors recently, so it may be a good idea to take a look at some factors that could impact the stock's near-term performance.
Shares of this company have returned -10.1% over the past month compared to a +1.5% change for the Zacks S&P 500 composite index. The Zacks Computer – Integrated Systems industry, which IonQ belongs to, has gained 4% in that period. The big question here is, where is this stock headed in the near term?
While media reports or rumors of major changes in a company's business prospects usually influence the movement of that company's share price, leading to immediate price movements, there are always certain fundamental factors that ultimately drive a buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company's future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company's earnings forecast goes up, the fair value of its stock also goes up. And if a stock's fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
IonQ is expected to post a loss of $0.23 per share for the current quarter, which would represent a -4.6% change from the year-ago period. The Zacks Consensus Estimate has remained unchanged within the past 30 days.
The consensus earnings estimate for the current fiscal year is -$0.84, indicating a change of -7.7% year over year. Over the past 30 days, this estimate has changed +5.6%.
Looking at the next fiscal year, the consensus earnings estimate is -$1.09, which represents a -29.8% change from what IonQ was expected to report a year ago. Over the past month, estimates have changed +10.1%.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned IonQ a Zacks Rank #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
A company's earnings growth is arguably the best indicator of a company's financial health, but nothing happens if the company can't grow earnings. It's nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company's earnings growth potential is very important.
For IonQ, the consensus revenue estimate for the current quarter is $11.05 million, indicating a change of +80% year-over-year. For the current and next fiscal years, the estimates of $40.44 million and $82.84 million indicate changes of +83.5% and +104.9%, respectively.
Last reported results and surprise history
IonQ reported revenue of $11.38 million for the most recent quarter, up +106.2% year over year. EPS was -$0.18 for the same period, compared to -$0.16 in the same period last year.
Compared to the Zacks Consensus Estimate of $8.4 million, reported revenues represented a surprise of +35.49%. EPS surprise was +18.18%.
Over the last four quarters, IonQ has surpassed consensus EPS estimates three times, and the company has topped consensus revenue estimates each time during that period.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company's growth prospects.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
IonQ is rated an F on this score, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding IonQ is worth following, although its Zacks Rank #3 suggests it may be capable of performing in line with the broader market in the near term.
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IonQ, Inc. (IONQ) : Free Stock Analysis Report
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