What’s Happening With IBM Stock?

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IBM: International Business Machines logo
IBM
International Business Machines

IBM stock (NYSE:IBM) has held up better than the broader technology pack this year, declining by just about 3% year-to-date, compared to the broader Nasdaq-100, which remains down by almost 11%. The stock has also risen by about 6% over the last month. There are a couple of factors that have helped IBM stock outperform this year. Firstly, IBM is growing once again after several years of revenue declines, following the spin-off of its low-margin information-technology services business. Over Q4 2021, the company posted stronger than expected revenue of $16.7 billion, up 6.5% versus last year and by over 8.6% adjusted for currency effects and spin-offs, marking IBM’s highest revenue expansion in almost a decade. The growth was driven by a strong performance of IBM’s hybrid cloud business, which grew by 16% year-over-year, and the consulting operations, which grew by around 13%. Separately, with monetary policy getting tighter and the U.S. Federal Reserve raising interest rates, investors have been moving out of high-multiple growth stocks toward value picks and this appears to be helping IBM stock, which trades at just about 13x forward earnings.

However, now that IBM stock has seen a rise of about 6% over the last month, will it continue its upward trajectory in the near term, or is a decline imminent? Going by historical performance, there is a slightly higher chance of a decline in IBM stock over the next monthOut of 336 instances in the last ten years that IBM stock saw a twenty-one-day rise of 6% or more, 153 of them resulted in IBM stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 153 out of 336, or only about a 46% chance of a rise in IBM stock over the coming month. See our analysis on IBM Chance of A Rise for more details.

Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last ten years’ data

  • After moving 0.06% or more over five days, the stock rose in the next five days on 50% of the occasions.
  • After moving 4% or more over ten days, the stock rose in the next ten days on 56% of the occasions.
  • After moving 6% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 46% of the occasions.
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We estimate  IBM valuation to be around $142 per share, about 10% ahead of the current market price.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 IBM Return 5% -4% -22%
 S&P 500 Return 1% -7% 98%
 Trefis MS Portfolio Return 2% -9% 259%

[1] Month-to-date and year-to-date as of 3/28/2022
[2] Cumulative total returns since the end of 2016

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