Quantum computing company – IonQ (NYSE:IONQ) – is set to report its earnings on Wednesday, May 7, 2025. Over the past four years, IONQ stock has exhibited significant volatility around its results announcements. Historical data reveals an equal probability (50%) of a positive or negative one-day return following these announcements. However, the magnitude of these movements differs considerably.
When positive, the median one-day return has been a substantial 21%, with a maximum of 34.4%. Conversely, negative one-day returns have shown a median decline of -5.7% and a maximum drop of -16.8%. This suggests that while the direction of the stock’s movement is uncertain, positive outcomes tend to be much more pronounced than negative ones.
For event-driven traders, understanding these historical patterns could offer a potential edge. Two primary strategies emerge:
- Pre-Earnings Positioning: Analyze the historical probabilities and establish a position before the earnings release.
- Post-Earnings Correlation Analysis: Examine the correlation between immediate and medium-term returns after the earnings are announced and position accordingly.
It’s crucial to acknowledge that the actual stock movement will heavily depend on how the reported results compare to market consensus and expectations.
From a fundamental perspective, IONQ currently has a market capitalization of $6.7 billion. Over the last twelve months, the company generated $43 million in revenue but reported significant operating losses of $-232 million and a net income of $-332 million, indicating that it is currently not profitable on an operational basis.
Now, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
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IonQ’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
- There are 12 earnings data points recorded over the last four years, with 6 positive and 6 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 50% of the time.
- The percentage remains the same at 50% if we consider data for the last 3 years instead of 5.
- Median of the 6 positive returns = 21%, and median of the 6 negative returns = -5.7%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
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