IBM stock forecast: Is IBM stock a good buy?
IBM is focused on cloud computing, AI after a big 2021 spin-off. What does that mean for the IBM stock forecast in 2022?
Computing giant IBM ended 2021 on a high note after a difficult 2020, when revenues fell and the company announced it would split into two.
But before we can get into the “Big Blue” stock forecast, we need to have a look at what the latest news is with the tech giant.
International Business Machines promised there would be improvement in 2021 and it delivered.
For the fourth quarter, IBM reported $16.7bn revenue, up 6.5%. When divested business and currency were considered, the increase was 8.6%, year-on-year.
“Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022,” said CEO Arvind Krishna in the 24 January release.
There were some bright spots. Total hybrid cloud revenue from the last year was up 20%, to $20.2bn.
Software, which includes hybrid platform, solutions and transaction processing, counted $7.3bn revenue, up 8.2%.
IBM also reduced its debt by $9.6bn to $51.7bn since the end of 2020 and returned $5.9bn to shareholders in dividends.
A priority for IBM was the spin-off of its managed infrastructure services arm. Kyndryl began trading on its own, under the KD symbol on the New York Stock Exchange on 3 November. KD plunged from $31.50 to $15.75 in its first month, and was still hovering below $17 by IBM’s earnings announcement.
IBM’s CEO, Arvind Krishna, said to analysts:
“Our most significant portfolio action was the separation of Kyndryl. You will remember we had initially expected the spin by the end of the year, and we completed it in early November. As we discuss our results, we'll focus on the new basis and structure that encompasses today's IBM”.
IBM’s free cash flow for the year stood at $6.5bn and had $7.6bn cash on hand, down $6.7bn from 2020 after acquisitions and debt payments.
What is your sentiment on IBM?
While consulting grew 13.1% to $4.7bn revenue, there is some caution to be struck over IBM’s infrastructure revenue, which was down 0.2% to $4.4bn, however. Although this was not a surprise, potential investors do need to take note.
CFO Jim Kavanaugh told analysts:
“We've aligned our business to a more platform-centric business model. And we're simplifying and redesigning our go-to-market to better meet client needs and execute on our growth agenda. Bottom line, we're exiting 2021 a different company. We have a higher-growth, higher-value business mix, with over 70% of our revenue in software and services and a significant recurring revenue base dominated by software”.
Stock price history
Has this latest update had any impact on the IBM share price? Before we can answer that, we need to take a quick look at the IBM stock price history. Although past performance does not indicate future results and it should not bear too heavily on the IBM stock forecast, it is worth having a look for context.
If we look back over the past year, we can see that IBM has had its ups and downs. The stock price started 2021 at $120.24, lost $5, and then saw recovery from March to June, when it peaked at $144.50 on 11 June.
The market was not pleased with the third quarter report, as the price went from $135.54 on 20 October to $122.58 the next day.
It was a different story the day after full-year results, when IBM was trading more than 5% better, trending upwards, towards the $138.22 close on 4 January 2022. An impressive rally from the fall doldrums, where it sat briefly below $116 on 26 November.
IBM price history
|Aug 17, 2022||137.49||0.82||0.60%||136.67||138.27||134.86|
|Aug 16, 2022||136.56||2.37||1.77%||134.19||137.22||133.63|
|Aug 15, 2022||134.23||1.12||0.84%||133.11||135.05||132.00|
|Aug 12, 2022||133.58||1.56||1.18%||132.02||133.95||131.03|
|Aug 11, 2022||132.42||1.50||1.15%||130.92||133.08||130.76|
|Aug 10, 2022||131.16||3.29||2.57%||127.87||131.63||127.87|
|Aug 9, 2022||129.27||-1.35||-1.03%||130.62||131.29||128.99|
|Aug 8, 2022||132.67||0.67||0.51%||132.00||133.22||131.14|
|Aug 5, 2022||130.86||-0.71||-0.54%||131.57||132.53||130.36|
|Aug 4, 2022||129.86||-2.34||-1.77%||132.20||132.46||129.86|
|Aug 3, 2022||131.51||-0.34||-0.26%||131.85||132.71||131.17|
|Aug 2, 2022||131.86||2.30||1.78%||129.56||132.64||129.46|
|Aug 1, 2022||131.62||1.74||1.34%||129.88||132.55||128.87|
|Jul 29, 2022||128.98||0.60||0.47%||128.38||130.85||128.38|
|Jul 28, 2022||129.10||0.66||0.51%||128.44||129.66||127.75|
|Jul 27, 2022||128.42||0.22||0.17%||128.20||129.29||127.12|
|Jul 26, 2022||128.17||0.19||0.15%||127.98||129.15||126.87|
|Jul 25, 2022||127.87||0.00||0.00%||127.87||128.99||126.37|
|Jul 22, 2022||127.37||1.29||1.02%||126.08||128.17||124.87|
|Jul 21, 2022||126.37||-1.70||-1.33%||128.07||129.11||124.99|
But what might this mean for the future? Let’s take a look.
Out of 16 analysts surveyed by CNN to give an IBM stock forecast, the overall consensus was that IBM would continue its growth in a steady way over the course of the next 12 months. The median rating was that IBM would rise to reach $144.26 this year. The most optimistic forecast would see the stock reach $164.29. However, we do have to strike a note of caution and point out that the lowest prediction would see it fall to $115.
The consensus opinion seems to be to hold on to your IBM stock. That was the verdict of 12 of the 19 analysts surveyed by CNN, with a further five advising buying and two advising selling the stock. None offered an outperform or underperform rating.
As you can see, analysts’ predictions are mixed. If you want to buy stock in IBM, remember to do your own research rather than rely on just one opinion.
It might be, if you believe in the more optimistic predictions. However, it is important to note that the majority of analysts seem to be telling people to hold onto their IBM stock rather than advising people to buy it. You will need to be cautious, and never forget that stock prices can go down as well as up. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.
Most analysts in the CNN poll expect that to happen this year. However, bear in mind that it has gone up before only to head back down again. Likewise, it has gone down after negative quarterly results, only to rise again.
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