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IBM (IBM) stocks rose Thursday to their highest level in more than a decade, boosted by the tech giant’s better-than-expected fourth-quarter results and progress on its artificial intelligence initiatives.
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Big Blue shares rose more than 9% to close at 190.43 in the stock market todaythe first time IBM shares closed above 190 since June 2013, according to Dow Jones Market Data.
Several Wall Street analysts raised their targets for IBM following the report released Wednesday. The Armonk, New York-based company said it earned an adjusted $3.87 per share on $17.4 billion in fourth-quarter sales. On average, analysts surveyed by FactSet expected IBM to earn $3.79 per share on $17.3 billion in sales for the quarter that ended in December.
“Customer demand for AI is accelerating and our pipeline for Watsonx and generative AI approximately doubled from the third to the fourth quarter,” said Arvind Krishna, president and CEO of IBM, in the Press release.
During the same period a year earlier, IBM earned an adjusted $3.60 per share and the company reported $16.7 billion in sales.
Forecast for 2024
For the fourth quarter, IBM’s software revenue increased 3% from the same period last year, while consulting revenue increased 5.8% and infrastructure sales increased 2.7%.
By 2024, Krishna said the company expects revenue to grow in the mid-single digits while generating $12 billion in free cash flow.
In 2023, IBM reported $61.9 billion in revenue, up 2% from 2022.
Additionally, IBM said in the press release that the company exceeded its 2023 goal of generating $10.5 billion in free cash flow, reaching $11.2 billion.
Analyst View on IBM Stock
At least eight Wall Street analysts raised their projections for IBM stock following the report, according to FactSet data.
Evercore ISI analyst Amit Daryanani raised his 12-month price target on IBM shares to 215, from 200, implying a 24% increase from Wednesday’s closing price. In a note to a client titled “Big Blue is back,” Daryanani reiterated an outperform rating for IBM. He said strong 2024 revenue guidance was helping to push the stock higher.
Additionally, Evercore estimates IBM’s AI orders at $500 million. Two-thirds of that spending goes to its consulting business and the rest to its software business, according to Evecore estimates.
“But this is growing at a very rapid pace and should sustain growth into 2024 and beyond,” Daryanani wrote.
Evercore ISI updated your view from IBM to an equivalent buy rating last week.
“Our sense is that IBM remains an underrated beneficiary of AI that should continue to do more work in the coming years,” Daryanani wrote on Wednesday.
On the other hand, Wedbush maintained a neutral stance. Analyst Moshe Katri said IBM’s 2024 revenue guidance is “likely ambitious.”
Katri noted that the growth rate of software companies slowed from 6% in the September quarter to 3% in the December quarter. Meanwhile, the consulting business also came in below expectations, with $5 billion in sales compared to projections of $5.1 billion, Katri noted. A better-than-expected performance for infrastructure boosted IBM overall.
Wedbush maintains a 12-month price target of 140 for IBM, well below the company’s current price.
IBM Stock: Technical Analysis
In terms of earnings, IBM had gained just over 7% in the first month of the year. Last year, IBM shares gained 16% compared with a 24% gain for the S&P 500 index.
But shares rose late last year, as enthusiasm grew about IBM’s potential to win the artificial intelligence business. IBM shares have risen more than 20% since the company reported third quarter earnings ahead of analyst expectations on October 26.
That performance is reflected in IBM’s technical scores. The company’s shares have a strong IBD Composite Score of 92 of the best 99 possible, according to IBD Stock Check. Additionally, its Relative Strength Rating sits at 88 out of a best possible 99, indicating that IBM stock has outperformed 87% of the market over the past 12 months.
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