International Business Machines Corporation, also known as IBM (IBM), released its earnings report last week, bringing mixed reactions. The company did show growth, but it wasn’t as expected, and it brought murmur waves of dissatisfaction from its shareholders, sending IBM stock down almost 12% since then. However, this is nothing major for a company that has been with us for 113 years. IBM doesn’t exist only in the present but plans heavily for the future. The company has seen how technology has changed how we live to the core, and it knows more than most how technological evolution can instantly change the landscape.
That is why we see one of the most historic companies on Wall Street as one of the leading forces in the reality-changing industry – AI – while it invests in the next step of a technological revolution, quantum computing.
Think of quantum computing like Sauron’s ring from Lord of the Rings. It’s the one ring to rule them all. If AI changes how we work, make decisions, and interact with technology, quantum computing takes all this and places it in overdrive.
Basically, quantum computing doesn’t calculate in the binary numbers system as GPUs do today in ‘Bit’ technology; instead, it calculates and computes in what is called superposition, where Qubits are placed in multiple places at the same time and connected the whole time, transferring and processing information at incredible speed and power. More importantly, in theory, quantum computing could solve the unresolved problems in material science, technology, biology, and much more.
We’re still very much in the beginning, and most analyses are still speculative; only the future can tell us what will happen. However, the company’s ability to navigate its business for over 113 years is admirable and can instill confidence in its investors.
If you wish to read more about IBM’s Q3 earnings report, you can read what our writer at Tipranks, James Fox, wrote here.
Now, let’s examine 3 talking points about what IBM has been doing in AI and quantum technology and why investors should remain optimistic about its prospects, despite the company’s failure to deliver in its last earnings report.
- IBM in the AI Realm: Even after yesterday’s stock decline, IBM stock rose over 47% in the past year, driven by investor excitement about its potential in AI. The company’s launch of Watsonx, a platform designed for commercial and government use, helps organizations elevate their business through storage, analytics, and even ethical aspects of running the operation. In the last year, Watson has generated $30 billion for the company and received great customer reviews. Also, thanks to its software segment, the company’s AI technology has accumulated 45% of its revenue in its last Q3 reports.
- IBM Is Planning the Future: IBM has been heavily investing in quantum computing, positioning itself as a potential leader in this revolutionary field. The global quantum computing market is projected to grow from $1.21 billion in 2023 to $12.62 billion by 2032, with a compound annual growth rate (CAGR) of 34.8%. IBM’s involvement in significant quantum research projects, such as the Fermilab-led initiative, a collaboration between the U.S. government and the private sector in developing a quantum supercomputer, is just one project it participated in. The company has recently exposed its Condor processor, the first processor to surpass 1,000 qubits, meaning it’s the strongest processor around (for now). Although quantum computing is still in its early stages, IBM’s historical legacy suggests it has the know-how to forge its position in the future of this industry.
- Valuation and Growth Prospects: After discussing AI and quantum computing, let’s put a positive spin on IBM’s valuation. The stock is currently trading at a forward earnings multiple of 22.8x, which is 4.8% below the tech sector average. This could present a good opportunity for investors to acquire IBM at an attractive valuation. Despite an expected earnings growth rate of 5.2% below the industry average, IBM demonstrates consistent performance. Additionally, with a 2.9% dividend yield, the stock appeals to income-focused investors. The PEG ratio of 4.43 underscores the market’s confidence in IBM’s potential, particularly in AI and quantum computing.
What Is the Price Target for IBM?
IBM is a Hold on Wall Street, with Five Buys, Seven Holds, and Two Sells. The average price target for IBM stock is $227.38, reflecting 10.97% upside.
Conclusion
In summary, IBM may have disappointed its shareholders in its last earnings call, sending the stock down almost 12%. However, from a broader perspective, IBM is still one of the most dependable stocks around, with 113 years of experience. It’s little wonder that a company with the business nous IBM possesses is investing in the most creative and innovative technologies: IBM knows how everything can change instantly and how it should be prepared for future tech, such as quantum computing. Indeed, this technology is still in its infancy, but IBM is still positioning itself in an industry that could change everything we see in life.
