IBM Stock Analysis

IBM Analysis

It is always difficult for analysts to stay positive on a company that suddenly loses more than 20B in annual revenue, but IBM may be a name which is worth looking at twice when diving deep into their numbers and valuation. Between 2019 and 2020, IBM’s revenue went from an average of around 80B annually to 55B, an alarming decrease, but since then, they have been slowly climbing back as they recovery from Covid’s impacts. The biggest highlight for them, which is also the highlight for many other companies in their space, is their focus on AI and cloud. Many tech companies have proven that the cloud is at the heart of revenue and is only expected to grow. IBM’s future guidance and projections are upbeat, and they’ve also come in line with analysts expectations. Fundamentally, they’re also valued fairly at a price to earnings ratio of 20. Many companies in the same space are valued at a much higher price to earnings ratio right now, for example MSFT’s P/E is 35, and Google’s P/E is 25. IBM is technically cheaper than these companies in terms of price to earnings, which could make them an attractive buy going into 2024. The company’s balance sheet is also healthy, with a 2:1 assets to liabilities ratio. And last but not least, they have over 60B in free cash flow. Free cash flow is extremely important to have, especially for a long existing company. It shows that they’ve been responsible with their money, gives them opportunities to innovate, and it can boost dividends for investors. IBM already pays a .81% dividend, that number will likely grow in the years to come. On its technicals, IBM is setting up a bullish flag on the daily chart, and it likely will continue the upward trend as long as markets stay healthy. The next resistance we have in place for it is 155.50, a move above that level has a price target of 161.00-162.00. 

Please note that historically IBM has suffered from inconsistency in terms of stock movement. Their revenue has reached a plateau, so it doesn’t move like a growth stock anymore. These names become more attractive for their dividends and only see large upside movement if they substantially grow revenue and earnings. IBM is on track to grow revenue again thanks to their cloud, but it may not be enough to give them an edge against bigger competitors in the same industry.