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International Business Machines Corporation (IBM), headquartered in Armonk, New York, is a leading global hybrid cloud, AI, and consulting expertise provider. Valued at $155.54 billion by market cap, the company helps businesses derive insights from their data, streamline business processes, reduce costs, and gain a competitive edge in their respective industries.
Companies worth $10 billion or more are generally described as “large-cap stocks,” IBM fits right into that category, signifying its substantial size, stability, and dominance in its industry. IBM serves several government and corporate entities in the financial services, telecommunications, and healthcare sectors.
The technology giant has fallen 15% from its 52-week high of $199.18, which it hit on Mar. 12. Shares of IBM are down 11.7% over the past three months, compared to the broader Nasdaq Composite’s ($NASX) 8.3% gains over the same time frame.
In the long term, IBM shares have gained 25.1% over the past year, and in 2024, the stock is up 3.5%. By contrast, the NASX is up 15.5% on a YTD basis and 30.8% over the past 52 weeks.
To confirm the recent bearish trend, the stock has been trading below its 50-day moving average since early April. However, it has been trading above its 200-day moving average since mid-July 2023.
On Apr. 25, IBM shares fell more than 8% in pre-market trading after the company reported weaker-than-expected Q1 revenue and confirmed its deal to acquire HashiCorp. The company’s Q1 revenue stood at $14.46 billion, below the consensus estimate of $14.57 billion. However, its adjusted EPS of $1.68 surpassed analysts’ estimates of $1.59.
IBM’s overall performance can be attributed to optimism around the company’s AI projects. The backlog of AI-related consulting contracts stands at $1 billion, up significantly from a few quarters ago. Its acquisition of HashiCorp is expected to unlock synergies with its hybrid cloud computing platforms and add a suite of hybrid and multi-cloud lifecycle management products. The company maintained its full-year outlook. It expects total revenue to grow at a mid-single-digit rate at constant currency and generate a free cash flow of about $12 billion.
In late April, IBM announced plans to spend $1 billion expanding its semiconductor packaging and testing plant over the next five years. Moreover, the company has integrated AI into its hardware offerings to facilitate data management and announced new storage capabilities that give clients choice and control in the data center to maximize performance through an option called IBM Storage Assurance.
Rival Oracle Corporation (ORCL) has outperformed IBM with 17.5% gains on a YTD basis. However, IBM’s returns over the past 52 weeks outshine ORCL’s 12.8% gains over this period.
After its recent underperformance compared to NASX, analysts remain cautious about IBM’s prospects. The stock has a consensus rating of “Hold” from the 14 analysts covering it, and the mean price target of $181.23 is a 7% premium to current levels.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
