Jayson DerrickThe COVID-19 pandemic has impacted nearly every company of all sizes in different ways. IBM is no exception as the IBM stock trend for 2020 has punished shareholders. The stock started the year just shy of $140 per share and was $20 per share higher by February.
But the IBM stock outlook quickly took a turn for the worse and at the peak of the market selloff, IBM’s stock traded below $100 per share for the first time since 2009.
Now that the market has somewhat calmed down and global economies continue to re-open, IBM is on a mission to deliver shareholder gains by conquering new markets.
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Repairing a damaged reputation
When billionaire investor Warren Buffett buys a stock, many investors are quick to follow his lead. After all, the “Oracle of Omaha” has a multi-decade-long track record of success and his stock-picking track record speaks for itself. So when he invested more than $10bn in IBM’s stock in 2011, the company known as “Big Blue” earned the biggest seal of approval.
But at the same time, the opposite transaction holds true – perhaps even more so. Buffett ceremonially declared on live TV in 2018 his investment in IBM was, in his own words, a “mistake.”
Buffett blasted IBM and said he feels “more certain about the future as I look at a company like Apple rather than IBM now”.
The company’s reputation of belonging to a select group of futuristic stocks was immediately shot down. Instead, the company that was founded in 1911 was downgraded to being a relic of the past.
But is that an unfair characterisation two years after Buffett’s exit? The latest IBM shares news from 2020 may say otherwise.
New leader sets the tone
Ex-IBM CEO Ginni Rometty led the company for eight years and by the most important metric for shareholders, her tenure was a failure. IBM stock analysis shows that shares were down 24 per cent from her first day as CEO to her final day.
According to CNBC, IBM was the one and only tech company valued at $100bn or more to lose value over the eight-year period.
Shareholders had plenty of reason to demand change. And change is what they got in early 2020. As the old saying goes, better late than never.
Rometty’s biggest flaw was her failure to take steps to position IBM as a new-age technology giant set to dominate for many decades ahead. Buffett, as is usually the case, was right.
Rometty was replaced with Arvind Krishna. He was promoted from within as senior vice president of Cloud and Cognitive Software where he: 1) led the hybrid cloud business, 2) transformed the company’s software and services portfolio and offerings towards the cloud, and 3) led IBM Research, a unit devoted to emerging technologies such as artificial intelligence, quantum computing, blockchain, cloud platform services, data-driven solutions and nanotechnology.
Does this sound like the necessary experience needed to take IBM to the next level? It most certainly does, and giving him the top job at IBM bodes well for any IBM stock projections.
Setting the vision
Krishna detailed his vision for IBM as a leader in hybrid cloud and artificial intelligence in early May during the IBM Think Digital 2020 event. He said these are the “two dominant forces driving digital transformation today”.
He explained in detail the many cloud-related initiatives the company is working on. One such example is the IBM Cloud Satellite, a feature giving customers the ability to use IBM Cloud anywhere.
The latest IBM share price news implies that the company is now in a better position to compete with the cloud giants and hopefully steal market share away from Microsoft, Amazon and Google. Working in IBM’s favour is an easier path to grow off a smaller base and a mission to prove to investors it belongs to be in the same category as the Microsofts of the world.
Other cloud-focused initiatives include those with artificial intelligence capabilities and services, such as Watson AIOps which uses AI to self-detect, diagnose and respond to IT anomalies in real-time.
The cloud business is growing very fast but it will be a market that is around to stay for many years to come. While IBM’s motivation to succeed alone isn’t a reason to come out with any IBM share price forecast, investors have reason to at least now be hopeful and optimistic.
IBM’s motivation to dominate the cloud business didn’t start in 2020. Rather, it picked up momentum with the late 2018 acquisition of Red Hat for $34bn – in which Krishna played an important part. In an attempt to double down on the acquisition and reinforce IBM’s commitment to large-scale and sustainable growth for years to come, Red Hat’s CEO Jim Whitehurst was named president of IBM to better implement their shared vision.
Together, the two executives at the forefront of the future of technology makes the case for IBM stock price predictions to rise in the coming years. The global hybrid cloud market is estimated to grow in size from $36.14bn in 2017 to $171.93bn in 2025, giving IBM an opportunity to shine.
IBM stock price forecast: room to recover
IBM’s stock was trading in the red after nearly five months of volatility but IBM stock price forecast 2020 remains favourable to the upside. Looking at IBM’s year-to-date stock chart shows multiple instances of the stock rebounding after falling to approximately $105.
The $105 level serves as a reasonable support level as it represents levels that haven’t been seen in many years. Despite some setbacks over the years and a new leader set to lead IBM into the future, investors believe that the IBM stock price forecast should be worth more in 2020 than it did in 2009.
IBM’s stock also comes with a respectable dividend near 5.5 per cent with the stock trading at around $120. As the stock dips lower, the yield increases slightly, giving investors a better bang for their buck.
According to TipRanks’ latest IBM stock projections, based on 12 analysts offering year-long price targets, the average price target for IBM is $132,36, which represents a 8.32 per cent increase from the last price of $122.19 and is 8 per cent lower from its 52-week high of $143.25.
The highest analysts’ price target for the next 12 months is $150.00, while the lowest expected price is $111.00.
While difficult to come with an accurate IBM share price prediction, all the signs point to a rebound in the coming years. This isn’t the same company that frustrated investors throughout the late 2010s. The company is more focused than ever before and over time investors will regain confidence in the iconic American company.
Don’t forget that with contracts for difference, it does not matter whether your view of the IBM stock price forecast 2020 is positive or negative. You can always try to profit from any future price fluctuations, regardless of their direction by taking a long or a short position respectively. Follow the latest stock market news and track the IBM live rates with Capital.com.
