International Business Machines (NYSE:IBM) closed last week highlighting its plans to acquire Apptio, a cloud-based software platform, for almost $5 billion. With the potential acquisition, IBM aims to further dig into the automation technology space. This adds to the many collaborations and partnerships announced in the past week by the company. Despite recent volatility in stock price, the stock still maintains analyst optimism.
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Apptio, a Plus for IBM
Washington-based developer of technology business management software Apptio has a customer rooster featuring a significant number of Fortune 100 companies, including Allstate (NYSE:ALL) and Bank of America (NYSE:BAC). The company sells online services that assist in managing IT budgets, forecasts, and analysis.
Reconstructing its business to focus on hybrid cloud and Artificial Intelligence (AI), IBM is reportedly nearing closure to its Apptio acquisition deal for a price range of $4.5 to $5 billion. The Wall Street Journal reported Friday that the deal is likely to reach an agreement over the weekend.
The price range is more than double the acquired price of Apptio by Vista in 2018. Vista Equity Partners purchased the earlier Nasdaq-listed Apptio in 2018 for $1.94 billion in a $38/share cash deal.
Collaborations to Drive Growth
Last week, IBM expanded its partnership with Adobe for assisting customers in developing AI-powered content supply chain solutions. The company plans to launch a range of Adobe consulting services for the same. Also, it revealed a new collaboration with will.i.am and FYI for leveraging AI for creatives.
Furthermore, in early May, IBM launched a new generative AI platform, IBM watsonx, which will enable enterprises to scale and boost advanced AI with data.
Is IBM Still a Good Buy?
Of the nine Wall Street Analysts covering the IBM stock, four rate it a Buy while five have assigned a Hold, taking the average analyst consensus rating to Moderate Buy. The average analyst price target is pegged at $146.56, implying a 13.2% upside potential from current levels.
Supporting the Buy rating is that IBM consistently raises its dividend . With the latest 2023 dividend raise, IBM has reported a 28th consecutive year of dividend increase. Its dividend yield of 5% is significantly higher than the sector average. With an estimated cash flow higher than a year ago, the company is likely to continue the path of raising dividends for the upcoming quarters.
Will IBM Ever Recover?
Noting the IBM stock price trend, it touched a low in the first week of May at $120 levels before peaking at $138 in June mid. However, the stock has again started falling since then.
Amid the volatile nature of the stock, in the past 6 months, the stock has eroded 6.8% of its value while a 3-month gain stands at 1.5%. In another negative sign, the Technical Analysis of IBM stock shows that based on its 20-Day and 50-Day exponential moving average the stock is a Sell. However, thanks to its recent integrations and new focus on AI, IBM stock could see a recovery in the near future.
