IBM is anticipated to report its Q1 2024 results on April 24, with an estimated revenue of $17.3 billion and earnings of $3.76 per share, in line with consensus estimates. The company’s core software operations are expected to drive growth, with software sales increasing by 5% year-over-year in Q4 due to higher sales of Data & AI solutions and Red Hat products. IBM has been capitalizing on the demand for artificial intelligence in the enterprise space, with its Watsonx platform enabling clients to deploy customized AI models. The acquisition of Red Hat in 2019 has also been a significant growth driver for IBM, alongside its consulting business, which saw a 6% increase in sales year-over-year in Q4.
Over a three-year period, IBM’s stock has seen strong gains of 50%, outperforming the S&P 500’s 35% increase. Despite this growth, IBM struggled to consistently beat the market, with returns of 6% in 2021, 5% in 2022, and 16% in 2023. Comparatively, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023. The Trefis High Quality Portfolio, comprising 30 stocks, has consistently outperformed the benchmark index each year over the same period, showcasing better returns with less risk. The current uncertain macroeconomic environment, marked by high oil prices and elevated interest rates, raises questions about whether IBM will continue to underperform the S&P 500 or experience a significant jump in the next 12 months.
Trading at around $186 per share, IBM stock is valued at close to 20x consensus 2024 earnings, which is considered elevated compared to historical levels. While IBM’s focus on areas such as cloud computing, AI, and automation shows promise, growth is expected to be subdued in the near term. The consensus points to low double-digit revenue growth for 2024 and 2025. IBM’s stock is valued at $177 per share, slightly below the current market price. Insights on IBM’s valuation and revenue trends can be found in Trefis analysis. Investors can explore Trefis Market Beating Portfolios for potential investment opportunities.
In conclusion, IBM is gearing up to report its Q1 2024 results, with expectations of moderate growth driven by its core software operations and strong performance in consulting sales. Despite recent stock gains, IBM has struggled to consistently outperform the S&P 500, reflecting broader challenges facing individual stocks in the information technology sector. The company’s focus on high-growth areas like AI and cloud computing bodes well for its future prospects, although growth is anticipated to remain modest in the coming years. Investors can leverage Trefis insights for a comprehensive understanding of IBM’s performance and valuation metrics, potentially identifying opportunities for market-beating returns.
