IBM Stock Experiences a Mixed Quarter Amid Economic Uncertainty
With a market cap of $193.2 billion, Armonk, New York-based International Business Machines Corporation (IBM) stands as a leader in information technology. The company offers integrated solutions that utilize hybrid cloud, AI, and consulting to help clients with their digital transformations worldwide.
IBM’s Strong Performance Outshines the Market
Over the past year, shares of IBM have significantly outperformed the broader market. The stock has increased nearly 39%, while the S&P 500 Index ($SPX) has risen 32.3%. In 2024, IBM shares are up 27.8%, compared to SPX’s 24.7% gain year-to-date.
Additionally, IBM has also surpassed the return of the Technology Select Sector SPDR Fund’s (XLK) 28.8% over the last 52 weeks, along with a 21.9% year-to-date gain.
Mixed Q3 Results Shake Investor Confidence
On October 23, IBM’s stock fell 6.2% following news of its mixed Q3 results. Revenue was approximately $15 billion, which fell short of analyst expectations of $15.2 billion, although the company reported a profit with an adjusted EPS of $2.30, surpassing the consensus of $2.27. However, Infrastructure revenue declined by 7%, and Consulting segment sales remained flat as clients reduced discretionary spending due to economic pressures. A one-time pension settlement charge of $2.7 billion also contributed to a substantial GAAP net loss, raising concerns among investors. While Software growth and hybrid cloud demand remained strong, worries over inconsistent segment performance and the limited impact of AI initiatives were also factors in the stock’s decline.
Future Earnings Projections Brighten Slightly
Analysts anticipate a 5.2% year-over-year growth in IBM’s EPS to $10.12 for the current fiscal year ending in December. IBM has a strong history of beating earnings estimates, having done so in the last four quarters.
Among the 17 analysts who cover the stock, the consensus rating stands at “Hold.” This is made up of four “Strong Buy” ratings, one “Moderate Buy,” ten “Holds,” and two “Strong Sells.”
Morgan Stanley Adjusts Price Target
On October 24, Morgan Stanley reduced IBM’s price target to $208 while maintaining an “Equal Weight” rating. This adjustment comes after noting misses in Consulting and Infrastructure revenue and operating income during Q3, despite the robust growth in Software and the stock trading near historic highs.
Currently, IBM is trading below the average price target of $221.41, with the highest target at $260 suggesting a potential upside of 24.4%.
On the date of publication, Sohini Mondal 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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
