Table of Contents
Key Points
- IBM has a tendency to trade sideways for extended periods.
- However, recent chart analysis shows an uptrend with increasing momentum.
- Investors should take note and be excited about IBM’s potential.
- 5 stocks we like better than Amazon.com
IBM NYSE: IBM, also known as Big Blue, has a history of trading sideways for long periods, causing frustration among investors. Even after being publicly traded for 14 years, IBM stock remained at its initial IPO price. While it’s easy to dismiss IBM as a struggling dinosaur, a closer look reveals new and promising developments. JP Morgan analysts were among the first to recognize this potential.
Technology Transformation
Analysts point to IBM’s ongoing transformation and the emergence of artificial intelligence (AI) as factors driving its growth. With the spinoff of its managed infrastructure services business Kyndryl, IBM’s revenue profile has shifted significantly. The majority of its revenues, over 70%, now come from its high-growth software and consulting business. This positions IBM more like industry leaders such as Amazon.com, Inc’s NASDAQ: AMZN and Oracle Corp’s NYSE: ORCL.
While IBM still has work to do to catch up with its peers in terms of stock performance, there are optimistic signs. RBC Capital recently initiated coverage on IBM stock with an Outperform rating, citing the strength of IBM’s software platform. Their price target of $188 suggests a potential upside of 30%.
Technical Setup
IBM’s stock has already seen a 25% increase since May and is approaching its highest levels since 2018. This upward trend has been consistent since 2020, marked by higher highs and higher lows. These are positive indicators for a sustained rally. Furthermore, IBM offers one of the best dividend yields in the big tech industry, currently at 4.5%.
