Should You Buy IonQ Stock Before Aug. 6?

Key Points

• IonQ is a popular pure-play quantum computing stock pick.

• Investing in IonQ is far riskier than in many of the big tech companies involved with quantum computing.

• 10 stocks we like better than IonQ ›

IonQ (NYSE: IONQ) has been one of the top pure-play quantum computing stock picks recently. It is taking a unique approach to quantum computing, which could pay off massively in the end. Although the stock has had an impressive run over the past few months, a single announcement can send shares soaring.

One of those could be coming on Aug. 6, when IonQ announces Q2 results. But is that a good enough reason to buy the stock now?

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IonQ must be successful, or the stock will become worthless

IonQ's popularity stems from its pure-play status. While there are many competitors in this exciting and emerging industry, IonQ is a more attractive investment option (alongside its pure-play peers) than some of the big tech companies due to the potential returns. IonQ is only an $11 billion company by market cap, making it quite small compared to some of its largest competitors, whose market caps are valued in the trillions.

Should IonQ win the quantum computing arms race, the upside could be immense. However, there is also a downside to being this small. The biggest factor is resources.

One giant in the quantum computing industry is Alphabet. Its Willow chip kicked off the latest round of quantum computing interest in December last year, and its technology is among the top in the quantum computing world.

Alphabet also has nearly an unlimited amount of resources to throw at this technology. Over the past 12 months, it generated nearly $70 billion in free cash flow. Sparing an extra $1 billion or so to fund quantum computing research would hardly be anything for Alphabet, yet that much money would be a huge deal for IonQ.

IonQ has few revenue streams outside various research contracts that it has won, as commercial viability is still being established. So it must wisely spend what cash it has on hand. It can always raise more capital by issuing more shares or taking on debt, but neither of those options is great for shareholders.

This raises another important point with IonQ: It's an all-or-nothing proposition. With a large player like Alphabet, it has a legacy business that it can lean on while the quantum computing side of things gets up and running. For IonQ, it's success -- or the stock goes to $0.

That all-or-nothing approach can result in a wide variety of investment outcomes, making the risk significantly higher with IonQ's stock than with one of the large quantum computing players. But as long as investors keep that in mind, IonQ could still be a viable investment opportunity.

But does that mean investors should scoop up shares now before IonQ's Q2 earnings report?

IonQ likely wouldn't wait until quarterly earnings to announce big news

There are only a handful of factors that will significantly impact IonQ's stock. The first is a new partnership or research agreement. These are often announced in press releases, and IonQ likely wouldn't wait until a quarterly report to announce something like this. Another item that could move the stock is a performance breakthrough, and once again, that's something that would be announced in a press release.

There isn't a ton of news that investors are waiting on in the quarterly earnings report. As a result, waiting around for the report to be released isn't a smart investing strategy.

If you believe in IonQ's trapped-ion approach or simply want exposure to the space, acquiring shares of IonQ now is a smart move, as it could announce groundbreaking performance at any time. However, investors should keep position sizing fairly small to compensate for the huge risk the stock represents.

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Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.