After several leading tech companies executed stock splits in 2024 — such as Palo Alto Networks and Super Micro Computer — many investors have searched for clues indicating whether additional tech stocks will also choose to split their stocks in 2025.
Soaring more than 520% over the past three years, a pioneer in quantum computing, IonQ (NYSE: IONQ), is one such popular tech stock that’s drawing investor interest right now as a potential stock split candidate.
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But does the stock’s impressive rise necessarily mean that management is preparing for a stock split in the near future? Let’s take a closer look at the likelihood that IonQ will soon appear on the stock split calendar.
Image source: Getty Images.
What’s behind IonQ’s recent rise?
Before examining how likely it is that IonQ will split its stock, it’s good to take a step back and review why the stock has soared so much in the first place.
Over the past three years, IonQ has made tremendous strides in growing its business — something that the market has rewarded considerably — with the launches of its Aria and Forte quantum computers. After reporting revenue of $1.4 million in 2021, IonQ booked sales of $43.1 million in 2024, and it projects continued growth in 2025. Should the company achieve the midpoint of its 2025 sales guidance, it will mean that the company has grown sales at a compound annual growth rate of 170% from 2021 through 2025.
It’s not just at the top of the income statement where IonQ has enjoyed success. IonQ has grown its gross profit from $1.1 million in 2021 to $22.5 million in 2024, averaging a gross profit margin of 59.9% during the four-year period.
Computing the probability that IonQ will announce a stock split
Many investors are highly motivated to identify potential stock splits, believing that if they buy shares before the stock splits — in the case of forward stock splits at least — they will be in a better position financially with the larger number of shares that they then own after the split takes effect. Experienced investors, however, know that this logic is faulty. Just as your dividing a slice of pizza into thirds doesn’t give you three times as much pizza as your original slice, you will have more shares after a forward stock split, but there’s no change in the value of your investment.
So why do companies split their stocks? There are a variety of reasons, though most frequently it’s because the share prices have risen to points that may preclude investors from buying a share. Understanding this, investors who are investigating IonQ will likely conclude that with shares rising as high as about $55 over the past year and trading around $35 as of this writing, it’s highly unlikely that management will deem it necessary to implement a stock split.
To put IonQ and a potential stock split in perspective, take the aforementioned Palo Alto Networks and Super Micro Computer stocks. Before they split their stocks last year, they were both trading near $400 per share.
Is now the time for quantum computing investors to load up on IonQ?
With the prospect of a stock split off the table, investors may wonder if it’s still a reasonable time to click the buy button on IonQ stock. Since the company doesn’t generate positive net income, traditional valuation metrics are unhelpful, but with shares plunging about 16% year to date, it seems that today provides a better opportunity than the start of the year. Of course, those interested in a position should perform their due diligence before making a final decision.
Should you invest $1,000 in IonQ right now?
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
