IBM stock forecast: is IBM stock a good buy?
IBM has just celebrated some positive quarterly results, but what does that mean for the IBM stock forecast?
The computing giant IBM has come back from a difficult year when revenues fell and the company was split in two.
The situation appears to be turning around for “Big Blue”, however, and the IBM stock forecast for 2021 and beyond is starting to look more optimistic.
But before we can get into the IBM stock forecast, we need to have a look at what the latest news is with the tech giant.
The IBM stock price forecast had been overshadowed by some disappointing results in recent quarters. Fourth-quarter revenues fell by 6% compared with 12 months earlier, though the company promised there would be improvement in 2021.
IBM appeared to be making good on its promise when the Q1 results came out in April, with overall revenue the best it had seen for three years. Sales rose by 1%, outperforming analysts’ expectations.
It was against this backdrop that the company released its latest results on 19 July. Again, the Q2 figures were encouraging. Revenue came in at $18.75bn, up 3% year-on-year, and easily more than the $18.29bn average estimates by analysts at the financial market data provider Refinitiv , while adjusted earnings per share were $2.33, ahead of Refinitiv's predictions of $2.29.
IBM’s chief executive, Arvind Krishna, said in a conference call:
“The overall spend environment continues to improve. With the economy reopening in many parts of the world, many markets and industries are getting back on track. We see this in North America and in select industries.”
One of the crucial ingredients in IBM’s recent successes is its cloud computing technology. The company made $7bn revenue in the quarter through its cloud division, up 13% from the same quarter a year earlier. Red Hat, the open-source software business that IBM bought in 2019, saw revenue growth of 17%, adjusted for currency.
IBM is optimistic about its future, with free cash flow of $11bn to $12bn in 2021.
There is some caution to be struck over IBM’s systems revenue which was down 7.3% to $1.7bn, however. Although this was not a surprise, potential investors do need to take note.
One move that bolstered IBM’s performance was the announcement of a split that was announced in October 2020. The company’s legacy IT infrastructure support services will be hived off as a separate company called Kyndryl by the end of 2021, with IBM now focusing on cloud computing and artificial intelligence.
Although the costs of the split amounted to a $0.20 loss per share, IBM believes it can forge ahead with futuristic new technology.
IBM’s CFO, James Kavanaugh, said: “We expanded operating margins and grew profit dollars in the quarter, providing a key contribution to our cash performance.
“In the first half of the year we increased adjusted free cash flow, invested in strategic acquisitions to strengthen our hybrid cloud and AI capabilities, continued to deleverage and, consistent with our commitment, again increased our dividend.”
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’s 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 hovered around the $125 mark from July until October, when some poor quarterly results saw it fall to an intraday low of $105.92 on 28 October. There was soon some recovery, though, and the stock soon recovered to the levels it had reached before the results.
A certain sense of déja vu appeared after the January quarterly results, with the price falling from an intraday high of $132.24 on 21 January to a low of $117.36 during the next day’s trading. Again, there was some recovery and there was even some growth when, after the next set of quarterly results, it hit $148.74 on 29 April. This pattern was repeated in July. It closed 19 July at $138.07 and, following the results overnight, it opened up on 20 July at $142.65, a rise of just over 3%.
IBM price history
|Nov 26, 2021||115.75||0.77||0.67%||114.98||116.18||111.87|
|Nov 25, 2021||116.53||0.00||0.00%||116.53||116.53||116.53|
|Nov 24, 2021||116.61||0.18||0.15%||116.43||117.12||115.95|
|Nov 23, 2021||116.37||0.01||0.01%||116.36||117.80||114.88|
|Nov 22, 2021||116.48||0.34||0.29%||116.14||118.68||115.03|
|Nov 19, 2021||115.93||-0.60||-0.51%||116.53||116.64||115.23|
|Nov 18, 2021||116.50||-1.36||-1.15%||117.86||118.30||116.06|
|Nov 17, 2021||117.87||-0.59||-0.50%||118.46||119.17||117.63|
|Nov 16, 2021||118.47||-0.17||-0.14%||118.64||119.76||118.14|
|Nov 15, 2021||118.64||-0.52||-0.44%||119.16||120.00||118.16|
|Nov 12, 2021||118.84||-1.32||-1.10%||120.16||120.48||118.65|
|Nov 11, 2021||120.17||0.26||0.22%||119.91||121.65||119.91|
|Nov 10, 2021||119.91||-0.80||-0.66%||120.71||122.28||119.80|
|Nov 9, 2021||120.70||-3.73||-3.00%||124.43||124.43||120.13|
|Nov 8, 2021||124.43||0.89||0.72%||123.54||124.71||122.87|
|Nov 5, 2021||123.32||2.35||1.94%||120.97||123.65||120.03|
|Nov 4, 2021||120.45||-2.22||-1.81%||122.67||123.17||119.76|
|Nov 3, 2021||126.99||3.05||2.46%||123.94||127.15||123.93|
|Nov 2, 2021||125.86||0.99||0.79%||124.87||127.00||124.77|
|Nov 1, 2021||125.94||1.01||0.81%||124.93||126.14||123.69|
But what might this mean for the future? Let’s take a look.
Out of 15 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 slightly to reach $150 next year, a 7.16% increase from the last price of 139.98. The most optimistic forecast would see the stock go up by not far off 30% to reach $185. However, we do have to strike a note of caution and point out that the lowest prediction would see it lose about 20% of present value to drop to $115.
The consensus opinion seems to be to hold on to your IBM stock. That was the verdict of 11 analysts surveyed by CNN, with a further five advising buying, one advising selling the stock, and another warning that it will underperform.
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.
Potentially. It has just risen by a decent amount after a positive set of quarterly results. 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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