IBM Shares Rally 16% In A Month, Now Is Not The Time To Buy The Stock

We believe there is a near-equal mix of good and bad in IBM stock given its overall Moderate operating performance and financial condition. But keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $265 Bil in market cap, International Business Machines provides integrated software, consulting, infrastructure, and financing solutions worldwide, including hybrid cloud platforms, enterprise open-source software, and on-premises and cloud-based server and storage services.

[1] Valuation Looks High

This table highlights how IBM is valued vs broader market. For more details see: IBM Valuation Ratios

[2] Growth Is Weak

• International Business Machines has seen its top line grow at an average rate of 2.4% over the last 3 years
• Its revenues have grown 2.7% from $62 Bil to $64 Bil in the last 12 months
• Also, its quarterly revenues grew 7.7% to $17 Bil in the most recent quarter from $16 Bil a year ago.

This table highlights how IBM is growing vs broader market. For more details see: IBM Revenue Comparison

[3] Profitability Appears Moderate

• IBM last 12 month operating income was $11 Bil representing operating margin of 17.1%
• With cash flow margin of 20.7%, it generated nearly $13 Bil in operating cash flow over this period
• For the same period, IBM generated nearly $5.8 Bil in net income, suggesting net margin of about 9.1%

This table highlights how IBM profitability vs broader market. For more details see: IBM Operating Income Comparison

[4] Financial Stability Looks Strong

• IBM Debt was $68 Bil at the end of the most recent quarter, while its current Market Cap is $265 Bil. This implies Debt-to-Equity Ratio of 25.6%
• IBM Cash (including cash equivalents) makes up $15 Bil of $149 Bil in total Assets. This yields a Cash-to-Assets Ratio of 10.4%

[4] Downturn Resilience Is Strong

IBM has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• IBM stock fell 20.2% from a high of $145.21 on 11 June 2021 to $115.81 on 26 November 2021 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 November 2022
• Since then, the stock increased to a high of $294.78 on 30 June 2025 , and currently trades at $284.31

 
2020 Covid Pandemic

• IBM stock fell 39.0% from a high of $149.08 on 12 February 2020 to $90.97 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 22 November 2022

 
2008 Global Financial Crisis

• IBM stock fell 44.8% from a high of $124.79 on 22 July 2008 to $68.86 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 December 2009

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read IBM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.