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IonQ (IONQ -1.58%) has taken investors on a wild ride since its public debut. The quantum computing company merged with a special purpose acquisition company (SPAC) and started trading at $10.60 per share on Oct. 1, 2021. IonQ's stock then nearly tripled to its all-time high of $31 on Nov. 17, 2021, but plummeted over the next 13 months to a low of just $3.04 per share on Dec. 28, 2022.

Like many other hyper-growth stocks, IonQ lost its luster as rising interest rates popped its bubbly valuations, highlighted its losses, and drove investors toward more conservative investments. But after bottoming out, IonQ's stock bounced back to about $12 again. Let's see if this volatile stock can stay ahead of the market over the next 12 months.

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Traditional computers use binary "bits" of zeros and ones to process data. Meanwhile, quantum computers use "qubits" which can store zeros and ones to simultaneously process data at much faster rates. That sounds like a generational leap forward in computing technology, but quantum computers are still much larger than traditional computers.

For example, IBM'scasing for a single qubit processing unit (QPU) is about six feet wide. Alphabet's Google has been developing a qubit processing system that is about 20 feet wide.

IonQ is tackling that problem with a newer type of QPU system that is only two inches wide. It built that system with a "trapped ion" architecture, which makes it smaller and easier to scale. That technology enabled it to build the "world's most powerful trapped-ion quantum computer," and it serves up that computing power as a cloud-based service through Amazon'squantum cloud computing service Braket, Microsoft'sAzure, and Google Cloud.

IonQ measures its quantum processing power in algorithmic qubits (AQs). During its pre-merger presentation, it claimed it could grow from AQ 22 in 2021 to AQ 29 in 2023. However, it actually hit AQ 29 seven months ahead of schedule in the first quarter of 2023 -- and it's now set on reaching its next milestones of AQ 35 in 2024 and AQ 64 in 2025. After that, it expects to achieve exponential growth and achieve AQ 1,024 by 2028.

IonQ initially predicted its revenue would reach $5 million in 2021, triple to $15 million in revenue in 2022, and then reach $34 million in 2023 as more companies used its services. But in reality, it only generated $3 million in revenue in 2022 and $11 million in revenue in 2023. It expects its revenue to grow about 70% to 73% to about $19 million in 2024.

IonQ's failure to meet its pre-merger targets caused many investors to lump it together with other SPAC-backed companies that overpromised and underdelivered. Its red ink made it even less appealing: It narrowed its net loss from $106 million in 2021 to $49 million in 2022, but racked up an even wider loss of $71 million in the first half of 2023.

IonQ's broken promises caused its stock to sink to its all-time low last December, but the growing interest in artificial intelligence (AI) stocks over the past year drove the bulls back to its stock. The continued expansion of the AI market will likely drive the growth of the quantum computing market as companies explore even faster ways to process data.

IonQ still has room to grow. IDC expects the quantum computing market to grow at a compound annual growth rate (CAGR) of 48% from 2022 to 2027, and IonQ could pace with the market if it continues to increase its computing power.

With an enterprise value of $2.18 billion, IonQ might seem overpriced at 115 times this year's sales. However, analysts expect its revenue to rise from $19 million in 2023 to $88 million in 2025, which would represent a CAGR of 115%.

If you think IonQ can successfully scale up its business and hit those targets, then its stock might not seem too expensive at 25 times its 2025 sales. It could also become a compelling takeover target for a larger tech company if it proves its trapped-ion technology is superior to other quantum computing technologies. However, the recent departure of its co-founder and chief science officer Chris Monroe -- who co-developed the trapped-ion process -- raises a few red flags.

I believe IonQ's stock will remain volatile as high interest rates and other macro headwinds generate headwinds for unprofitable hyper-growth stocks. It might still be a good speculative play for investors who can afford to tune out the noise for a couple more years, but I'm not too confident it can outperform the market over the next 12 months.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.

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Where Will IonQ Stock Be in 1 Year? - The Motley Fool