International Business Machines (IBM) AI Stock Analysis

• Market Cap: $234.08B
• Dividend Yield: 2.65%
• Average Volume (3M): 5.24M
• Price to Earnings (P/E): 39.3
• Beta (1Y): 0.65
• Revenue Growth: 1.45%
• EPS Growth: -20.56%
• Country: US
• Employees: 305,300
• Sector: Technology
• Sector Strength: 48
• Industry: Software
• EPS (TTM): 6.42
• Shares Outstanding: 927,264,340
• 10 Day Avg. Volume: 4,703,703
• 30 Day Avg. Volume: 5,241,181
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 3.73
• Price to Cash Flow (P/CF): 13.50
• P/FCF Ratio: 12.40
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $260.00
• Price Target Upside: 2.68% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 14

IBM's overall score reflects its robust financial performance and positive earnings call outlook, tempered by technical indicators suggesting an overbought status and a high valuation. The company's strong cash flow and software growth are significant strengths, while high leverage and valuation concerns are key risks.

Positive Factors

Cost Efficiencies

Cost efficiencies and PTI margin expansion targets are ahead of expectations.

Software Growth

Revenue growth is expected to be led by Software with growth of around 10%, indicating a strong emphasis on expanding this segment.

Negative Factors

Execution Challenges

Near-flawless execution is needed to meet multi-year targets at a premium valuation.

International Business Machines Business Overview & Revenue Model

Company Description

International Business Machines Corporation (IBM) is a global technology and consulting company headquartered in Armonk, New York. It operates in various sectors including cloud computing, artificial intelligence, computer hardware, and software. IBM is renowned for its enterprise solutions, providing a suite of offerings such as infrastructure, software, and consulting services, catering primarily to large businesses and governmental organizations worldwide.

How the Company Makes Money

IBM generates revenue through multiple streams, primarily focusing on its hybrid cloud and artificial intelligence segments. The company offers cloud services, including infrastructure as a service (IaaS) and platform as a service (PaaS), which are pivotal to its growth strategy. Additionally, IBM earns from software sales, including middleware and operating systems, and provides extensive consulting and IT services to help clients with digital transformation. Hardware sales, particularly mainframes and servers, also contribute to its earnings. Significant partnerships with large enterprises and governments enhance its service reach and revenue potential. Furthermore, IBM's strategic investments in research and development foster innovation, enabling the creation of new products and services that drive future revenue.

International Business Machines Financial Statement Overview

Summary

IBM demonstrates solid financial performance with stable profitability and effective cash flow management. However, the high leverage reflected in the balance sheet may pose risks. The company shows a moderate growth trajectory in revenues, complemented by strong ROE and cash flow ratios, but should be cautious of its relatively low equity ratio.

Income Statement

IBM's TTM (Trailing-Twelve-Months) financials show a moderate gross profit margin of 56.33% and a net profit margin of 9.60%, indicating stable profitability. The revenue growth rate is 1.44% compared to the previous annual period, suggesting modest sales growth. EBIT and EBITDA margins are healthy at 14.09% and 16.27%, respectively, reflecting efficient cost management.

Balance Sheet

IBM's debt-to-equity ratio is high at 2.14, indicating significant leverage. The return on equity is strong at 22.06%, showing effective use of equity to generate profits. However, the equity ratio of 19.91% points to a relatively low equity base compared to total assets, which could pose risks during economic downturns.

Cash Flow

The free cash flow growth rate is minimal at 0.79% compared to the previous year, but the operating cash flow to net income ratio of 2.23 indicates strong cash generation relative to net earnings. Additionally, the free cash flow to net income ratio stands at 2.03, highlighting robust cash flow conversion.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
62.75B	61.86B	60.53B	57.35B	73.62B
	Gross Profit
35.55B	34.30B	32.69B	31.49B	35.58B
	EBIT
6.01B	0.00	2.37B	5.99B	5.92B
	EBITDA
12.18B	14.69B	6.85B	12.00B	11.36B
	Net Income Common Stockholders
6.02B	7.50B	1.64B	5.74B	5.59B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
14.59B	13.44B	8.74B	7.25B	13.81B
	Total Assets
137.18B	135.24B	127.24B	132.00B	155.97B
	Total Debt
58.40B	59.94B	54.01B	55.14B	66.47B
	Net Debt
44.45B	46.87B	46.13B	48.49B	53.26B
	Total Liabilities
109.78B	112.63B	105.22B	113.00B	135.25B
	Stockholders Equity
27.31B	22.53B	21.94B	18.90B	20.60B
Cash Flow		Free Cash Flow
11.76B	12.12B	8.57B	10.41B	15.15B
	Operating Cash Flow
13.45B	13.93B	10.44B	12.80B	18.20B
	Investing Cash Flow
-4.94B	-7.07B	-4.20B	-5.97B	-3.03B
	Financing Cash Flow
-7.08B	-1.77B	-4.96B	-13.35B	-9.72B

International Business Machines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 253.21
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IBM, the sentiment is Positive. The current price of 253.21 is below the 20-day moving average (MA) of 257.25, above the 50-day MA of 237.76, and above the 200-day MA of 207.39, indicating a neutral trend. The MACD of 4.23 indicates Positive momentum. The RSI at 53.92 is Neutral, neither overbought nor oversold. The STOCH value of 29.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for IBM.

International Business Machines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	81 Outperform	$2.89T	31.30	30.64%	0.81%	15.04%	12.38%
ORCL	75 Outperform	$464.46B	40.64	84.57%	0.99%	6.40%	12.83%
CSCO	74 Outperform	$251.67B	27.72	20.18%	2.52%	-5.34%	-30.57%
HPE	72 Outperform	$26.02B	10.37	10.29%	2.73%	3.30%	25.00%
IBM	67 Neutral	$234.08B	39.28	22.06%	2.65%	1.45%	-20.56%
DELL	66 Neutral	$72.11B	16.11	-179.12%	1.86%	7.99%	―
Sector *	59 Neutral	$22.39B	11.53	-18.05%	2.31%	5.00%	-25.89%

International Business Machines Corporate Events

IBM Emphasizes Hybrid Cloud and AI Strategy

On February 4, 2025, IBM’s Investor Day highlighted its strategic focus on hybrid cloud and AI technologies. The company reported achieving its 2024 financial targets, including revenue growth and the highest free cash flow margin in its history. IBM’s strategy involves leveraging its extensive partner network and investing in innovation to drive sustainable growth. The company’s performance metrics and non-GAAP financial disclosures aim to provide investors with a clear understanding of its financial health and operational efficiency.

IBM Reports Q4 2024 Growth and AI Leadership

In its fourth-quarter 2024 earnings presentation on January 29, 2025, IBM reported a revenue growth of 3% and $12.7 billion in free cash flow. The company highlighted significant achievements with its Software segment growing 9%, and Red Hat achieving double-digit growth. Despite some challenges in Consulting, IBM expressed confidence in future growth driven by technology momentum and strategic partnerships. The company also emphasized its leadership in generative AI, with a growing book of business and a focus on AI-driven business transformations. Looking ahead, IBM anticipates revenue growth of over 5% in 2025, supported by its enhanced portfolio and culture of innovation.

IBM Sets Investor Day for February 2025

IBM has announced that it will host an Investor Day on February 4, 2025, in New York City, also offering a live webcast for remote participants. The event, featuring Chairman and CEO Arvind Krishna and other senior leaders, will focus on the company’s strategy and key initiatives. This is a significant opportunity for investors to gain insights into IBM’s future direction.