IBM’s Strong Free Cash Flow and Software Growth Propel Buy Rating
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 30 2025
0mins
Should l Buy IBM?
Source: Business Insider
Analyst Ratings: Wamsi Mohan from Bank of America Securities has reaffirmed a Buy rating for IBM, raising the price target to $270 due to strong financial performance and anticipated growth in software revenue, particularly from Red Hat.
Investment Appeal: Despite a weaker revenue outlook, IBM's potential for higher free cash flow and robust dividends make it an attractive investment option, supported by another Buy rating from Evercore ISI with a price target of $275.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy IBM?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on IBM
Wall Street analysts forecast IBM stock price to rise
16 Analyst Rating
11 Buy
4 Hold
1 Sell
Moderate Buy
Current: 259.520
Low
210.00
Averages
315.80
High
375.00
Current: 259.520
Low
210.00
Averages
315.80
High
375.00
About IBM
International Business Machines Corporation is a provider of global hybrid cloud and artificial intelligence (AI) and consulting expertise. The Company’s segments include Software, Consulting, Infrastructure and Financing. The Software segment includes hybrid cloud and AI platforms, which allow clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The Consulting segment focuses on integrating skills on strategy, experience, technology and operations by domain and industry. The Infrastructure segment is focused on the hybrid cloud infrastructure market, providing on-premises and cloud-based server and storage solutions. In addition, it offers a portfolio of life-cycle services for hybrid cloud infrastructure deployment. The Financing segment provides client and commercial financing, facilitating its clients’ acquisition of hardware, software and services. It helps clients in more than 175 countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Quantum Computing Inc. Faces Significant Financial Risks
- Revenue vs. Market Cap: Quantum Computing Inc. generated only approximately $546,000 in revenue over the past 12 months, while its market capitalization stands at $1.87 billion, indicating a severe disconnect that could undermine investor confidence.
- High R&D Spending: The company spends tens of millions annually on development, and while it has $555 million in cash reserves, the ongoing high expenditures could erode financial stability and impact future growth prospects.
- Equity Dilution Risk: Over the past year, the company issued more than $840 million in additional common stock to fill funding gaps, which raises concerns about significant shareholder dilution and the market's perception of its future financing capabilities.
- Management Trust Issues: The management frequently makes exaggerated claims that lack substantial backing, leading to skepticism about the sustainability of its contracts, primarily consisting of one-off research grants, which further heightens investor concerns about future performance.
See More
Investment Opportunities in Quantum Computing
- IonQ's Technological Edge: IonQ is acquiring SkyWater Technology, which is expected to position it as a leader in quantum computing hardware manufacturing, thereby accelerating hardware iteration and enhancing market competitiveness.
- Quantum Computing Market Potential: IonQ aims to develop systems with over 1 million qubits, which would provide a significant technological advantage in the quantum computing field, attracting investor interest in its future growth potential.
- Alphabet's Financial Strength: With over $400 billion in revenue over the past 12 months, Alphabet leverages its strong financial resources and over a decade of quantum computing R&D experience, making it a key player in the quantum computing sector.
- IBM's SDK Leadership: IBM's quantum computing software development kit (SDK) has been downloaded over 13 million times, showcasing its leadership in quantum computing software, even as hardware competition continues.
See More
IYW ETF 52-Week Price Fluctuation Analysis
- Price Range Analysis: The IYW ETF has a 52-week low of $117.55 and a high of $211.98, with the last trade at $191.41, indicating significant volatility over the past year, which investors should monitor to inform their investment strategies.
- Technical Analysis Tool: Comparing the current share price to the 200-day moving average can provide valuable insights for investors, helping to identify potential buying or selling opportunities to optimize investment decisions.
- ETF Trading Mechanism: ETFs trade like stocks, where investors are buying and selling 'units' that can be created or destroyed based on investor demand, reflecting changes in market interest in the ETF.
- Liquidity Monitoring: Weekly monitoring of changes in shares outstanding helps track notable inflows or outflows, where inflows necessitate purchasing underlying assets, while outflows may lead to selling, impacting the performance of individual components within the ETF.
See More
IBM Reports Strong Earnings Amid AI Risk Concerns
- Strong Earnings: IBM's latest quarterly report reveals a 12% revenue growth to $19.7 billion, surpassing Wall Street's expectations of $19.23 billion, with adjusted earnings per share at $4.52, exceeding the anticipated $4.32, indicating robust performance in software and AI sectors.
- AI Risk Warning: Noted short seller Jim Chanos warns that IBM's AI strategy poses risks, asserting that the company operates more as a marketing and consulting firm rather than a technology leader, highlighting its 'India-centric body shop model' as a potential hindrance to future growth.
- Software Division Growth: IBM's software division saw a 14% revenue increase to $9 billion, driven by recent software acquisitions; Chanos pointed out that these acquisitions are not adequately reflected in the free cash flow definition, which may affect investor perceptions.
- Market Reaction: Despite strong earnings, IBM's stock fell approximately 4.8% during Thursday's trading session, reflecting market concerns over AI risks, particularly following Kyndryl Holdings' review of its accounting practices, leading to a cautious investor sentiment.
See More
Palantir Stock Drops 4.93% Amid Bearish Sentiment
- Stock Volatility: Palantir Technologies closed at $129.13, down 4.93%, primarily influenced by investor Michael Burry's bearish outlook on the company and the broader AI cycle, reflecting market concerns over its premium valuation.
- Surge in Trading Volume: The trading volume reached 73.4 million shares, which is 61% above the three-month average of 45.6 million shares, indicating a significant increase in market interest in Palantir's stock despite the price decline.
- Strong Performance: Despite facing pressure, Palantir's fourth-quarter revenue increased by 70% year-over-year, with U.S. commercial revenue soaring by 137%, demonstrating robust demand for its AI platforms among enterprise and government clients, while management's guidance exceeded Wall Street expectations.
- Future Outlook: Recent upgrades from HSBC and Northland Securities highlight the potential for sustained growth, but the market's cautious stance on future returns suggests that Palantir's outlook will depend on whether its commercial momentum and margin expansion can justify its current high valuation.
See More
Datavault AI Faces Conflict Between Technical Signals and Business Momentum
- Technical Warning: Datavault AI Inc (NASDAQ:DVLT) has just triggered a Death Cross signal, typically seen as a warning of sustained downside pressure, even as its business momentum accelerates, highlighting a conflict between technical and fundamental indicators.
- Poor Stock Performance: The company's stock has declined approximately 45% over the past year and nearly 30% year-to-date, currently trading well below its 52-week high of $4.10, reflecting a prolonged downtrend that keeps traders cautious.
- Super Bowl Showcase: Datavault showcased its 'ADIO' data-over-sound and holographic technologies during Super Bowl LX in partnership with NFL Alumni, demonstrating immersive data transmission on one of the world's largest stages, enhancing brand visibility.
- IBM Collaboration Expansion: The company has expanded its collaboration with IBM to deploy enterprise-grade AI at the edge through its SanQtum AI platform, further strengthening its positioning in infrastructure-level AI solutions.
See More
Quantum Computing Inc. Faces Significant Financial Risks
- Revenue vs. Market Cap: Quantum Computing Inc. generated only approximately $546,000 in revenue over the past 12 months, while its market capitalization stands at $1.87 billion, indicating a severe disconnect that could undermine investor confidence.
- High R&D Spending: The company spends tens of millions annually on development, and while it has $555 million in cash reserves, the ongoing high expenditures could erode financial stability and impact future growth prospects.
- Equity Dilution Risk: Over the past year, the company issued more than $840 million in additional common stock to fill funding gaps, which raises concerns about significant shareholder dilution and the market's perception of its future financing capabilities.
- Management Trust Issues: The management frequently makes exaggerated claims that lack substantial backing, leading to skepticism about the sustainability of its contracts, primarily consisting of one-off research grants, which further heightens investor concerns about future performance.
See More
Investment Opportunities in Quantum Computing
- IonQ's Technological Edge: IonQ is acquiring SkyWater Technology, which is expected to position it as a leader in quantum computing hardware manufacturing, thereby accelerating hardware iteration and enhancing market competitiveness.
- Quantum Computing Market Potential: IonQ aims to develop systems with over 1 million qubits, which would provide a significant technological advantage in the quantum computing field, attracting investor interest in its future growth potential.
- Alphabet's Financial Strength: With over $400 billion in revenue over the past 12 months, Alphabet leverages its strong financial resources and over a decade of quantum computing R&D experience, making it a key player in the quantum computing sector.
- IBM's SDK Leadership: IBM's quantum computing software development kit (SDK) has been downloaded over 13 million times, showcasing its leadership in quantum computing software, even as hardware competition continues.
See More
IYW ETF 52-Week Price Fluctuation Analysis
- Price Range Analysis: The IYW ETF has a 52-week low of $117.55 and a high of $211.98, with the last trade at $191.41, indicating significant volatility over the past year, which investors should monitor to inform their investment strategies.
- Technical Analysis Tool: Comparing the current share price to the 200-day moving average can provide valuable insights for investors, helping to identify potential buying or selling opportunities to optimize investment decisions.
- ETF Trading Mechanism: ETFs trade like stocks, where investors are buying and selling 'units' that can be created or destroyed based on investor demand, reflecting changes in market interest in the ETF.
- Liquidity Monitoring: Weekly monitoring of changes in shares outstanding helps track notable inflows or outflows, where inflows necessitate purchasing underlying assets, while outflows may lead to selling, impacting the performance of individual components within the ETF.
See More
IBM Reports Strong Earnings Amid AI Risk Concerns
- Strong Earnings: IBM's latest quarterly report reveals a 12% revenue growth to $19.7 billion, surpassing Wall Street's expectations of $19.23 billion, with adjusted earnings per share at $4.52, exceeding the anticipated $4.32, indicating robust performance in software and AI sectors.
- AI Risk Warning: Noted short seller Jim Chanos warns that IBM's AI strategy poses risks, asserting that the company operates more as a marketing and consulting firm rather than a technology leader, highlighting its 'India-centric body shop model' as a potential hindrance to future growth.
- Software Division Growth: IBM's software division saw a 14% revenue increase to $9 billion, driven by recent software acquisitions; Chanos pointed out that these acquisitions are not adequately reflected in the free cash flow definition, which may affect investor perceptions.
- Market Reaction: Despite strong earnings, IBM's stock fell approximately 4.8% during Thursday's trading session, reflecting market concerns over AI risks, particularly following Kyndryl Holdings' review of its accounting practices, leading to a cautious investor sentiment.
See More
Palantir Stock Drops 4.93% Amid Bearish Sentiment
- Stock Volatility: Palantir Technologies closed at $129.13, down 4.93%, primarily influenced by investor Michael Burry's bearish outlook on the company and the broader AI cycle, reflecting market concerns over its premium valuation.
- Surge in Trading Volume: The trading volume reached 73.4 million shares, which is 61% above the three-month average of 45.6 million shares, indicating a significant increase in market interest in Palantir's stock despite the price decline.
- Strong Performance: Despite facing pressure, Palantir's fourth-quarter revenue increased by 70% year-over-year, with U.S. commercial revenue soaring by 137%, demonstrating robust demand for its AI platforms among enterprise and government clients, while management's guidance exceeded Wall Street expectations.
- Future Outlook: Recent upgrades from HSBC and Northland Securities highlight the potential for sustained growth, but the market's cautious stance on future returns suggests that Palantir's outlook will depend on whether its commercial momentum and margin expansion can justify its current high valuation.
See More
Datavault AI Faces Conflict Between Technical Signals and Business Momentum
- Technical Warning: Datavault AI Inc (NASDAQ:DVLT) has just triggered a Death Cross signal, typically seen as a warning of sustained downside pressure, even as its business momentum accelerates, highlighting a conflict between technical and fundamental indicators.
- Poor Stock Performance: The company's stock has declined approximately 45% over the past year and nearly 30% year-to-date, currently trading well below its 52-week high of $4.10, reflecting a prolonged downtrend that keeps traders cautious.
- Super Bowl Showcase: Datavault showcased its 'ADIO' data-over-sound and holographic technologies during Super Bowl LX in partnership with NFL Alumni, demonstrating immersive data transmission on one of the world's largest stages, enhancing brand visibility.
- IBM Collaboration Expansion: The company has expanded its collaboration with IBM to deploy enterprise-grade AI at the edge through its SanQtum AI platform, further strengthening its positioning in infrastructure-level AI solutions.
See More
