IBM stock price is rising: Is the Big Blue a good buy today?

IBM stock price has bounced back in the past few weeks, moving from a low of $233 in August to $259 today. This rebound happened as investors bought the dip following its post-earnings dip in July. This article explores whether IBM is a good stock to buy today.

IBM stock price plummeted after its earnings

IBM, a top technology company, plunged in July when it published it second-quarter results. The numbers showed that the revenue rose by 8% to 17%. 

All its business divisions grew during the quarter, with the software, consulting, and infrastructure jumping by 10%, 3%, and 14%, respectively. 

Its software business remains its largest, generating over $7.4 billion in revenue. In this business, the company offers solutions like hybrid cloud, automation, data, and transaction processing. 

Meanwhile, the consulting business, where it competes with companies like Accenture and Wipro, rose by 3% to $5.3 billion. This division has come under substantial pressure in the past few months as Trump’s Department of Government Efficiency (DOGE) has ended many contracts. 

IBM Infrastructure business, which is made up of hybrid infrastructure and infrastructure support, made over $4.1 billion. 

Like other similar companies, investors are focusing on artificial intelligence, an area which IBM is lagging its top peers like Oracle, Amazon, and Microsoft. 

In its report, the management noted that its orderbook stood at $7.4 billion. In contrast, Oracle noted that its remaining performance obligations (RPO) jumped to nearly $500 billion.

While IBM’s cloud computing business is growing, its market share continues to shrink. The big 3, AWS, Azure, and Google Cloud hold market share of 63%, while Alibaba and Oracle have 4% and 3%, respectively. IBM is much smaller than these firms. 

Earnings growth and valuation 

Wall Street analysts believe that IBM growth will continue, albeit at a slower pace in the future. The average estimate is that the company will make $16 billion in the current quarter, a 7.56% increase from what it made in the previous one. Other tech companies like Oracle and Microsoft are still experiencing double-digit revenue growth.

Read more: IBM turnaround: is the giant awakening?

Analysts see IBM’s revenue rising by 8% in Q4 to $19 billion, bringing its annual revenue to $65 billion, a 6% annual increase.

IBM’s earnings growth is also expected to continue gradually, with the EPS growing from $2.3 in Q3’24 to $2.44 in the current quarter.

Taken together, these numbers show that IBM is still growing, albeit at a slower pace than its closest competitors. As such, its valuation should take this into account.

SeekingAlpha data shows that IBM has a GaaP forward price-to-earnings ratio of 27 and a non-GaaP multiple of 23. These numbers are fair consider that other competitors have multiple of over 35.

IBM share price technical analysis

The weekly chart shows that the IBM share price has rebounded in the past few weeks, moving from a low of $233 to $259 today. It has moved back to the ascending channel, which has been forming since January last year. 

IBM share price has remained above the 100-week Exponential Moving Average (EMA), which is a highly bullish aspect.

Therefore, the most likely scenario is where the stock continues rising as bulls target its all-time high of $292. This price is notable because it is a few points below the average 12-month estimate of Wall Street analysts, who see it rising to $297.