This article takes an in-depth look at the IBM stock and considers if investors should buy IBM shares in 2022.
Stock Name and Trading Stock Exchange Platform:
International Business Machines corporation – NYSE (NYSE: IBM)
- Dow Jones Industrial Average (DJIA: IBM)
- S&P 500 Component.
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The Stock Sector:
IBM is multinational technology conglomerate that is involved in the development of tech infrastructure services, software services, IT and hardware services.
It operates through five main segments: Cognitive solutions, Global Business services (GBS), Technology services & Cloud platforms, Systems and global financing.
The Cognitive solutions segment delivers a spectrum of capabilities, from descriptive. Predictive, and prescriptive analytics to cognitive systems.
The IBM company has a robust rooster of business partners; some 80,000 partners to service to service 5,200 clients, which include 95% of all Fortune 500.
IBM is majorly a B2B company, but has consequential indirect impact to everyday consumers. It manages 90% of all credit card transactions worldwide, also accounting for 50% of all wireless connections globally.
The IBM company was founded in 1911 by Charles Ranlett Flint, as the Computing-Tabulating- recording company and is one of the founding organizations that birthed the modern-day computer industry.
The IBM brand of activities has evolved over time and has become a key player in the computing industry. IBM’s reach is global with their headquarters in New York.
Recent News on IBM
IBM is planning to work with Red hat and Amazon’s AWS to help modernize the US department of education management system.
The joint collaboration with other tech players will replace the current G5 system with a better open and flexible cloud based system.
IBM’s CEO, Arvind Krishna addressed a wall street journal event, stating his view on AI. He forecasted that AI transformation of business will take at least another decade.
IBM has also embraced the ESG (Environmental, Social and governance) approach and has come up with its own framework based on what it calls the ‘IBM Impact’.
The company suspended all its operations in Russia following the arising geopolitical conflict. IBM says it won’t be affected by the move with Russia making only 0.5% of its total activities.
It has released its earnings report earlier this week on Tuesday, outperforming the expectations.
Current Position of IBM
IBM is still by far and large the de facto computer company. It has existed way before the upcoming tech companies and thus is very in touch with the roots of the sector.
The IBM company currently sits at a market capitalization of $124.39B. It operates in over 175 countries and employs just a little shy of 300,000 staff members, thus one of the largest employers worldwide.
The earnings reported posted on the 19 April 2022 was remarkable and the metrics were all in the green.
Ceased operations in Russia has however slashed some $300M or so from its margins. The IBM stock has had its best day in two years this week owing to the exceptional results.
The IBM company is a renowned researcher, involved in many large projects from mainframe computers to Nanotechnology.
It holds a record of the leading annual patents by an organization in the US for 28 years consecutively. It IS also home to five Nobel laureates.
IBM has waned over 5 years and some investors consider it a falling giant. The company is too large and involved in way too many sectors globally, thus lacking a competitive advantage.
It was at its finest back in the 70’s and 80’s when IBM was the most admired corporation. It has endured world wars and depressions in the course of its history.
However IBM thrived during these circumstances and become a vital contractor for the US government.
If IBM instead focused on one sector, say the computer software revolution, it would not have been unseated by the likes of Microsoft in the 70’s. Growth has slowed down and it hit peak in 2013.
IBM is also a major inventor and has given the world the following: The Automatic teller machine (ATM), floppy disks, hard disk drive, the magnetic stripe card, & SQL programming.
It has seen the best run of the decade at the beginning of this year. They have thus reaffirmed that they are far from dead. This claim was made due IBM’s declining revenue over past few years.
Although IBM is no longer the crown jewel and benchmark standard of the industry as it once was, it still is doing a lot behind the scenes that could one day propel it back to former glory.
The company reported that the growth in cloud services was largely responsible for the upswing, yet they barely scratched the surface, with projections of cloud services to reach $1.6T by 2030.
The IBM company is majorly held by institutions, who make up 55% ownership of its common stock. The rest of the 65% is owned by insiders and the general public of private investors.
Huge institutions like Blackrock, Vanguard, State Street, and other large funds are invested in IBM. Therefore the company contributes to a larger part of sustaining the economy, with pensions and social aid reliant on it.
The IBM company is still involved in cutting edge technology, working on quantum computing, nanotechnology, artificial intelligence, machine learning and many more.
It is still quite a contender in the tech world and should not be disregarded. An IBM breakthrough in one of these fields could be a potent disruptor.
As of 21 April 2022, IBM closed the day at $139.85, an uptick of +1.11%. The company is trading at a day range of $137-$139 per share. The company is greatly below its all-time high.
It has traded at an annual high of $146 and a low of $114 in the past year. The volume of shares traded is currently at 4.65 million.
The share price is down at the moment from its peak of $215 in 2013. This due to the decline of the company in many segments, thus they have sold off a number of their units.
Revenue has thus decreased over the decade; this does not necessarily mean they are dead but indicates sale of most of their cash flowing subsidiaries.
IBM stock is showing signs of rallying in the recent months, especially after the excellent reports. IBM still needs to improve a lot to reclaim their former prominent position.
Sentiment on IBM
IBM’s ‘rise and fall’, is seen an exemplar that no company is too big too fail. This is however, not a conclusion on IBM’s future performance.
They might not be at the helm of the tech world anymore, but IBM are not extinct. They are positioned in such a way that they could rebound anytime.
The fair value of the IBM company stock is valued at roughly $100 as of now. This is not an absolute price of the stock as it could be higher depending on the growth.
IBM has to drive hypergrowth in specific in-demand sectors that could be viable in the near future. Among these the most promising are AI, Cloud services and quantum computing,
It also has interests in the metaverse. It is at a critical position as an underlying developer of new technologies. IBM provides a lot of infrastructure to power the available developments today.
The choice of a B2B model, and not much in the public eye, accords them privacy and room to explore their options without external pressure.
IBM is a momentous corporation that could bloom in a good environment.
Profits for IBM
The company has seen declining revenue over the years which has adversely affected their profit margins. Revenue for the quarter beat the consensus of $13.85B, coming in at $14.2B.
This is still however, a 20% drop from last year. Net income was $733, a 23% drop. The company recorded fantastic cash and equivalents valued at $3.26B, a 208% rise.
Dividend yield was at a good 4.85% and they have historically issued high yield to shareholders. They have done well and this has certainly attracted investors.
IBM need to sustain this uptrend to keep capital flocking into the stock. IBM is fairly profitable but it needs to do better.
Future of IBM
IBM is a powerhouse in the tech sector. It has changed its focus from legacy infrastructure to AI and consulting services.
Consulting services raked in 13.3% of revenue for the company in the recent quarter. They need to advance these sectors whilst focusing on the most effective route to growth and high returns.
The IBM company is not going to collapse anytime soon, despite wild notions of it being a dinosaur. In my view it will be around to see a few more boom and busts cycles.
An uncertain future, where the current economy comes to its knees, poses a threat to IBM. The government has bailed out big corporations, but as the dollar loses it reserve currency status, the situation could end up being very dire for these companies.
Innovation rules and runs the tech world and if IBM does just this, they can emerge triumphant once again.
Overall verdict on IBM
IBM is a tricky play, the stock is dormant with modest hikes. The bears are still in control at the moment. Bullish signs are showing if they increase they replicate the quarterly results.
Moving averages indicate a strong buy while oscillators show a sell signal.
IBM stock: Should I buy IBM shares in 2022?
The stock is an overall buy but one should opt for caution as it is susceptible to more downsides.
IBM Stock Price Chart
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