IBM stock surged Thursday to its highest level in more than a decade, boosted by the tech giant's better-than-expected fourth quarter results and the progress of its artificial intelligence initiatives.
Shares of Big Blue rallied more than 9% to close 190.43 on the stock market today, the first time IBM stock closed above 190 since June 2013, according to Dow Jones Market Data.
Several Wall Street analysts raised their targets for IBM following the report which was released Wednesday. The Armonk, N.Y.-based company said it earned an adjusted $3.87 per share on $17.4 billion in fourth-quarter sales. On average, analysts polled by FactSet expected IBM to earn $3.79 per share on $17.3 billion in sales for the December-ending quarter.
"Client demand for AI is accelerating and our book of business for Watsonx and generative AI roughly doubled from the third to the fourth quarter," Arvind Krishna, IBM chairman and chief executive, said in the news release.
During the year-earlier period, IBM earned an adjusted $3.60 per share and the company reported $16.7 billion in sales.
Forecast For 2024
For the fourth quarter, IBM's software revenues bumped up 3% from the same period last year, while consulting revenues increased 5.8% and infrastructure sales increased 2.7%.
For 2024, Krishna said the company expects revenue to grow in the mid-single digits while generating $12 billion in free cash flow.
In 2023, IBM recorded $61.9 billion in revenue, up 2% from 2022.
Further, IBM said in the news release that the company exceeded its 2023 objective of generating $10.5 billion in free cash flow, reaching $11.2 billion.
Analyst View On IBM Stock
At least eight Wall Street analysts upped their projections for IBM stock following the report, according to FactSet data.
Evercore ISI analyst Amit Daryanani raised his 12-month price target for IBM stock to 215, from 200, implying 24% upside from Wednesday's closing price. In a client note titled "Big Blue Is Back," Daryanani reiterated an outperform rating for IBM. He said the strong revenue guidance for 2024 was helping drive the stock higher.
Further, Evercore estimates that IBM's AI orders are $500 million. Two-thirds of that spending is within its consulting business and the rest in its software business, according to Evecore's estimates.
"But this is growing at a very fast pace and should sustain the growth in 2024 and beyond," Daryanani wrote.
Evercore ISI upgraded its view of IBM to a buy equivalent rating last week.
"Our sense is IBM remains an underappreciated AI beneficiary that should continue to work higher over the next few years," Daryanani wrote on Wednesday.
On the other hand, Wedbush maintained a neutral stance. Analyst Moshe Katri said IBM's revenue guidance for 2024 is "likely ambitious."
Katri noted that the growth rate for the software businesses slowed from 6% in the September quarter to 3% in the December quarter. The consulting business, meanwhile, also came in below expectations, with $5 billion in sales compared with projections of $5.1 billion, Katri noted. Stronger than expected performance for the infrastructure lifted IBM overall.
Wedbush holds a 140 12-month price target for IBM, well below the company's current price
IBM Stock: Technical Analysis
Coming into earnings, IBM had gained just over 7% in the first month of the year. Last year, IBM stock gained 16% compared to a 24% gain for the S&P 500 index.
But shares rallied late last year, as excitement grew about IBM's potential to win artificial intelligence business. IBM shares are up more than 20% since the company reported third-quarter earnings ahead of analyst expectations on Oct. 26.
That performance is reflected in IBM's technical scores. The company's stock has a strong IBD Composite Rating of 92 out of a best-possible 99, according to IBD Stock Checkup. Moreover, its Relative Strength Rating checks in at 88 out of a best-possible 99, indicating IBM stock has outperformed 87% of the market over the past 12 months.
