IBM stock forecast: Will IBM shares fare the tech industry turmoil as the company refocuses on AI and hybrid cloud computing?
US technology company International Business Machines (IBM) is one of only a few companies in the sector with a high market capitalisation to provide investors a positive return on its share price in 2022, as the Nasdaq Technology Index (US100) ends its worst year since 2008.
The IBM stock price has gained 2.9% for the year, while the US Tech 100 has plunged by more than 35%.
The 111-year-old company has not been the hottest of tech stocks in recent years, but in 2022, with inflation and interest rates rising, geopolitical uncertainty and the prospects for a global recession looming, investors have turned to IBM for its stability.
Is the stock likely to remain a safe haven for investors in 2023?
In this article, we look at some of the latest IBM stock predictions from analysts.
IBM boasts rich tech innovation heritage
IBM was founded in 1911 in New York through the merger of several companies that were developing business transaction automation. The company was initially called Computing-Tabulating-Recording Company (CTR), and was renamed International Business Machines in 1924.
IBM developed its Model 360 mainframe computer in the 1960s, building computers and software for the Apollo space missions. The company has also been involved in the development of speech recognition technology, the first computer-driven airline reservation system, the magnetic swipe strip on cards, floppy disks, supermarket barcodes and LASIK surgery, as well as personal computers and supercomputers. IBM has topped the US patent list for the last three decades, receiving more patents than any other US company.
IBM initially struggled to keep pace with the emergence of personal computers, but focused on high-margin products and soon returned to profitability. IBM sold its PC division to Lenovo (0992) in 2005.
Today, the company manufactures and sells hardware, and also provides middleware and operating systems software, strategic outsourcing, maintenance services, cloud technology, business consulting, and financing. IBM has operations in 171 countries around the world.
The company is nicknamed “Big Blue”, in part because of its blue logo and partly because it had a dress code of white shirts with blue suits in the past.
IBM’s shares are listed on the New York Stock Exchange (NYSE) and the Chicago Stock Exchange. It is one of 30 companies in the Dow Jones Industrial Average (US30), an index of 30 large US blue chip companies.
What is your sentiment on IBM?
IBM share price holds up in bearish year for tech
The IBM stock price reached its peak above $200 in March 2013. The stock then declined as the company’s trailing 12-month revenue trended lower from more than $100bn until 2020, when it dropped by almost half during Covid-19 lockdowns. The share price fell to $91.11 a share in March 2020, from $146.53 a month earlier.
The stock has recovered gradually from the drop, returning to the $140 level in June 2021 before retreating to $115.81 in November last year. The share price has climbed from $136.05 at the start of 2022 back to the $140 level, having dipped to $117.57 in October before its latest rally to $150.57 on 13 December.
Inflation at four-decade highs, soaring energy prices and an aggressive pace of interest rate hikes by the US Federal Reserve (Fed) as well as other central banks have weighed heavily on growth stocks such as technology companies, in favour of less volatile stocks in established companies that are viewed as more stable during recessions.
Consumer technology companies that benefited from Covid-19 lockdowns have fallen out of favour as restrictions have been removed, whereas companies like IBM that are focused on business-facing trends in digitalisation, cloud computing and the adoption of artificial intelligence have benefits.
IBM tends to be viewed as a value rather than growth stock, and offers an attractive 4.71% dividend yield with a history of 23 years of consecutive payments for income-focused investors.
In the third quarter ended 30 September, IBM reported revenue of $14.1bn, which was up by 6% year-on-year, and revised up its full-year revenue guidance to above its model for mid-single digit growth. It reported a net loss for the quarter of $3.2bn, compared with a net income of $1.03bn in the third quarter of 2021. Its year-to-date loss totalled $1.07bn, from a net income of $2.25bn in the nine months ended 30 September 2021.
IBM is in the midst of a turnaround led by chief executive officer (CEO) Arvind Krishna’s plan to focus on artificial intelligence and hybrid cloud computing along with professional services.
Krishna said on the company’s quarterly earnings call:
At the time of writing, analysis by stock data provider Simply Wall Street showed that IBM stock was trading 25.4% below its fair value estimate for the company, and earnings were forecast to grow by 70.8% per year.
However, its risk analysis showed that the company’s debt and dividend are not well covered by operating cash flow, large one-off items are affecting its financial results and at 2.3%, profit margins are lower than last year’s 4.6%.
Will IBM’s stock continue to provide positive returns for investors amid market volatility? Below, we look at some of the latest analyst projections for an IBM stock price forecast.
IBM stock forecast: is IBM a buy or sell for 2023 and beyond?
At the time of writing, the consensus from analysts indicated that IBM was a buy, but consensus price targets implied that there was little further upside left for the share price, which could stabilise over the next year.
The average 12-month price target from eight Wall Street analysts that have issued an IBM share price forecast was $139.40 a share, little changed from its current level, according to data compiled by MarketBeat. Estimates ranged between $11 at the low end and a high of $155 a share. Four of the analysts rated the stock a buy, while three recommended holding and one recommended selling the stock.
On 20 October, following the third quarter results release, analysts at Credit Suisse cut their IBM stock forecast to $155 from $158 with an outperform rating and UBS analysts lowered their target slightly to $111 from $112, while analysts at Evercore ISI raised their forecast to $135 from $125 a share.
Analysts at Morgan Stanley left their IBM stock forecast unchanged at $152 on 20 October, writing in a note to clients: “In our view, it's hard to poke many holes in the 3Q report and the better than feared quarter is illustrative of IBM's improved business mix, higher recurring revenue base, and late-cycle defensibility.
For the longer term, the IBM stock forecast for 2025 from algorithm-based forecaster Wallet Investor is that the stock could stabilise at $142.544, compared with $142.131 at the end of 2024 and $141.501 at the end of 2023.
The IBM stock forecast for 2023 from AI Pickup estimated that the share price could average $135.76. However, the site’s algorithm was bearish on the long-term outlook, predicting that the stock could fall to an average of $117.81 in 2025 and $69.40 by 2030.
When evaluating any IBM stock forecast, we recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision.
Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.
FAQs
Is IBM a good stock to buy?
Whether IBM is a good stock for your portfolio depends on your risk tolerance, portfolio composition and investing strategy. Always do your own research. Remember that past performance is no guarantee of future success.
Will IBM stock go up or down?
The direction of the IBM share price depends on broad market sentiment, as well as the company’s financial performance, among other factors.
Should I invest in IBM stock?
Whether you should invest in IBM is a personal decision only you can make depending on your personal circumstances. You should do your own research to come up with an informed view of the stock. Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.
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