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Barchart
Barchart
Nauman Khan

Is IBM Stock a Buy, Sell, or Hold Ahead of Huge Quantum Computer Launch in 2025?

Quantum computing stocks have majorly captivated investors in 2025. Still, the road to widespread adoption has been dogged by caution, as Nvidia (NVDA) CEO Jensen Huang and Meta Platforms (META) CEO Mark Zuckerberg both warned that practical quantum computing could be more than a decade away. However, recent progress shatters these timelines, suggesting the computing industry is advancing rapidly.

While many companies are working on quantum computing, International Business Machines (IBM) is positioning itself at the forefront of this evolution. With plans to launch the world’s largest quantum computer in 2025, the company is on the verge of a breakthrough that could redefine computational possibilities. This ambitious move builds on IBM’s legacy of innovation, from mainframes to artificial intelligence and now the quantum revolution. Quantum computing leverages subatomic particles to perform calculations at extraordinary speeds on some of the world’s most powerful supercomputers. If IBM successfully scales its quantum capabilities, it could unlock AI advancements far beyond what’s currently possible.

For investors, IBM’s quantum leap represents both a technological milestone and a potential growth catalyst. As this transformative moment approaches, here’s what you need to know about IBM stock.

About IBM Stock

Founded in 1911, International Business Machines (IBM) is a global technology company that provides software, hardware, and services to businesses and organizations worldwide. Since 2020, the company has been in the midst of a turnaround under new CEO Arvind Krishna. The company spun off its traditional managed IT services into Kyndryl (KD) and shifted its focus to high-growth sectors, such as Red Hat’s open-source solutions, hybrid cloud, and artificial intelligence (AI). During that period, its revenue grew at a compound annual growth rate (CAGR) of 4%, while its EPS rose at a CAGR of 13%.

After a bumpy start to the year, IBM’s stock gained significant momentum in the latter half of 2024, peaking at a 52-week high of $239.25 in December. Over the past 52 weeks, the stock has risen by nearly 33%, though it is currently trading about 9% below its peak. The recent pullback can be attributed to broader market fluctuations and ongoing macroeconomic conditions, which have impacted many tech stocks.

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For over a century, IBM has been a feast for dividend-hungry investors. The company has raised its dividend payments for 29 consecutive years, offering shareholders a yield of 3% and an annual payout of $6.68 per share.

IBM Focuses on Enterprise AI 

IBM’s focus on enterprise AI solutions stands out in a crowded field dominated by flashy general-purpose AI models. At the core of this strategy is Watsonx, a platform designed to simplify AI agent development, testing, and deployment. Unlike alternatives that focus on basic compliance, Watsonx ensures robust governance for industries like finance and healthcare. IBM embeds observability and monitoring tools to mitigate risks such as data leaks or rogue AI behavior, giving enterprises confidence in their AI deployments.

Although Watsonx is a technological powerhouse, IBM’s consulting arm has driven the majority of its $3 billion in AI bookings. IBM’s consulting business helps accelerate revenue growth while paving the way for cross-selling its software and infrastructure.

IBM Reports Mixed Q3 Results

IBM reported its third-quarter results on Oct. 23, disappointing investors due to declines in its consulting and infrastructure segments, leading to a 6% drop in shares during the following trading session. The tech giant generated revenue of $14.9 billion, falling short of analysts’ expectations by $107 million yet achieving modest 2.3% year-over-year growth.

The software division drove growth, producing $6.52 billion in revenue, a 10% increase year-over-year. Red Hat’s revenue surged 14%, its strongest quarter since the acquisition. Software gross margins remained robust at 83%.

The consulting segment experienced a 0.5% revenue decline to $5.2 billion. Krishna highlighted IBM’s $3 billion generative AI business, which grew $1 billion sequentially, as a key growth driver.

On the earnings side, IBM reported a net loss of $330 million, or $0.36 per share, due to a one-time pension settlement charge. Adjusted EPS reached $2.30, exceeding estimates of $2.27. Free cash flow for the first nine months came in at at $6.59 billion, with management maintaining its $12 billion full-year target.

Looking ahead, IBM forecasts Q4 revenue growth consistent with Q3’s 2% constant currency increase. Analysts project Q4 revenue at $17.6 billion, up 1.25% year-over-year, with an EPS forecast of $3.74

What Do Analysts Think About IBM Stock?

IBM’s recent developments in the generative AI market have triggered some price target upgrades from analysts. On Jan. 14, UBS raised its price target for IBM from $150 to $160, though it maintained a “Sell” rating. Stifel Nicolaus increased its price target from $205 to $246 and issued a “Buy” rating on the technology stock.

Overall, Wall Street has adopted a cautious stance on IBM, with a consensus “Hold” rating primarily due to weakness in its consulting and infrastructure business. Of the 16 analysts covering the stock, four have issued a “Strong Buy” rating, one assigned a “Moderate Buy,” nine suggest “Hold,” and two give it a “Strong Sell” rating.

The average 12-month price target of $225.19 implies 3% upside potential, reflecting tempered optimism regarding the stock.

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The Bottom Line

After a pullback from its 52-week high, IBM trades at 20.49 times forward earnings, below the industry average of 24x, presenting a compelling discount. The stock appears undervalued to me, supported by its potential in AI agents and quantum computing, which could serve as catalysts for growth. However, investors should note that while quantum computing offers immense potential, it may take several years to achieve practical commercial applications.

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