IBM stock price has surged to a record high, capping a turnaround that started in 2020 when it crashed to a low of $68.45. It has jumped by 315%, giving it a market capitalization of over $250 billion, making it one of the biggest technology companies.
IBM turnaround continues
IBM, commonly known as the Big Blue, has gone through a remarkable turnaround in the past few years. This turnaround started in 2020 after the company had a rough patch under Ginni Rometty.
Krishna has implemented several strategies to turn around the company. Its most important approach was to spin off its infrastructure business into Kyndryl, a company whose market cap has jumped to almost $10 billion.
Spinning out the infrastructure removed billions in stagnant revenue and let it to focus in faster-growing areas like cloud and artificial intelligence. It also let the company shed over 73,000 employees.
Krishna has also implemented several acquisitions to boost its business in emerging markets. It acquired HashiCorp last year in a $6.4 billion deal, a move that introduced a high-growth and high-margin business.
Further, IBM has focused on accelerating its hybrid computing model, which allows companies to store data on the cloud and on-premises.
This approach has started to pay off as its annual revenue has risen gradually from $54 billion in 2020 to $62.8 billion in the trailing twelve months (TTM).
Growth is continuing
The most recent results showed that IBM’s business has grown gradually, with its artificial intelligence business starting to pay off. Its revenue rose by 1% to $14.5 billion.
This growth happened as the software revenue rose by 7%, while its consulting and infrastructure revenue fell by 2% and 6%. Krishna said:
“There continues to be strong demand for generative A, and our book of business stands at more than $6 billion inception-to-date, up more than $1 billion in the quarter.”
Analysts anticipate that IBM’s growth will continue this year. The average revenue estimate for the current quarter is $16.5 billion, a 5.15% increase from the same period last year.
IBM will then make $16 billion in the third quarter, $66 billion this year, and $69 billion in the next financial year. These numbers will represent about 5% annualized growth rate.
IBM’s earnings per share is expected to grow to $2.65, up from $2.43, while its annual EPS will be $10.9 and $11.64, respectively.
The company hopes to continue growing by focusing on its core business and its quantum computing. It is working on a new quantum computer that will be fault-tolerant by 2029. Analysts believe that the quantum computing industry will grow from $1.3 billion in 2024 to $5.3 billion by 2019.
These numbers may help to justify its valuation multiples. The company has a forward price-to-earnings ratio of 25, a few points higher than the sector’s median of 22.
IBM stock price forecast
The daily chart shows that the IBM share price has been in a strong bull run in the past few months. Most recently, it has risen in the past nine consecutive days, pushing it to the highest level on record.
IBM has moved above the key resistance level at $269.4, the highest point on May 19. It invalidated the forming double-top pattern by moving above that level.
IBM has remained above all moving averages, while the Average Directional Index has jumped to 20, a sign that the trend is continuing.
Therefore, the most likely scenario is where the stock moves to $270 and then resumes the uptrend. Such a move would then push it to $300.
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