The quantum computing industry is in the limelight amid the rapid increase in technological innovation and the development of quantum artificial intelligence.
Fortune Business Insights recently quantified the industry’s growth outlook, stating that it expects the quantum computing market to grow by 34.8% annually until 2032. Most data vendors’ outlooks agree with Fortune Business Insights, illustrating the systematic risk attached to the quantum computing arena.
Considering the above, I embarked on a journey to find three best-in-class quantum computing stocks. Methodologically, I emphasized fundamental factors, valuation multiples, and event-driven activities. Moreover, I overlaid my screening process with technical analysis to ensure alignment.
Although the industry’s prospects are bright, quantum computing stocks can be volatile. Therefore, quantum computing stocks might only be suitable for some.
However, if you’re a risk-seeking investor, then here are three quantum computing stocks to consider.
FormFactor (FORM)
FormFactor (NASDAQ:FORM) is a favorite at B. Riley (NASDAQ:RILY). The investment bank recently upgraded the stock’s price target to $74 from $65 based on the “magnitude and pace of AI-led fundamental and financial acceleration.”
For those unaware, FormFactor offers numerous cryogenic test and measurement solutions to quantum engineers. As such, the company fills a critical void in the quantum computing industry.
Although it uses quantum computing as an enabler, FormFactor will likely benefit from the industry’s core systematic support and its high-barriers-to-entry. Moreover, FormFactor services additional markets, including automotive and aerospace, diluting its concentration risk.
Furthermore, FormFactor’s short-term variables are aligned. For example, the company recently surpassed its second-quarter estimates by eclipsing its revenue target by $2.51 million and its earnings-per-share target by four cents.
FormFactor’s successful quarter led to a gross profit margin of 45.3% and a return on common equity ratio of 13.62%, illustrating the company’s competitive zeal.
FORM stock has shed more than 20% of its value in the past month, dragging its relative strength index down to about 41, which I believe provides investors with a solid entry point.
IonQ (IONQ)
IonQ (NYSE:IONQ) is an exciting prospect. The company aims to build the world’s best quantum computers to solve some of the world’s most complex problems to better society, industries and the environment.
By doing so, IonQ can offer its investors alluring returns while contributing to society through revolutionary endeavors.
This quantum computing gem is backed by SoftBank (OTCMKTS:SFTBY). Although SoftBank recently trimmed its stake by 510,000 shares, it remains heavily invested, owning approximately 2.63 million shares.
SoftBank’s positive view of IonQ was recently substantiated after IonQ delivered a staggering second-quarter earnings report.
IonQ’s second-quarter revenue increased by 1.06x year-over-year to $11.4 million, settling above its midpoint guidance of $8.4 million.
Additionally, IonQ secured $9 million in bookings during the quarter, adding to its accelerating product uptake.
IONQ stock is trading below its 10-, 50-, 100-, and 200-day moving averages, suggesting a “buy the dip” opportunity has emerged. Although its price-to-sales ratio of 44.61x is high, IonQ’s exponential growth and technical indicators provide substance to a bullish argument.
International Business Machines (IBM)
IBM (NYSE:IBM) is a household name that rarely needs an introduction. The company has a broad suite of offerings.
However, among its most compelling verticals is quantum computing, which, given the current data aggregation landscape, will likely add convexity to IBM’s growth trajectory.
The company debuted its “next-generation” quantum processor and “quantum system two” in late 2023. Numerous technology analysts have speculated about the veracity of IBM’s quantum capabilities.
However, the general consensus is that IBM will eventually benefit from seamless quantum integration, concurrently amplifying its growth multiples.
A drift away from IBM’s quantum-specific aspects and into its financial market-based variables communicates additional promise.
For example, IBM released its second-quarter earnings report last month, revealing a revenue beat of $180 million and an earnings-per-share beat of 19 cents.
Moreover, IBM conveyed a robust full-year outlook, stating that it anticipates its free cash flow to reach $12 billion and its revenue to increase by “mid-single” digits.
Lastly, IBM stock’s total return outlook is compelling. For instance, IBM has an enterprise value-to-revenue ratio of only 3.58x and a forward dividend yield of 3.47%, suggesting its stock is grossly undervalued with solid income-based attributes.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.