IBM is set to report its Q1 2024 results on April 24, and analysts expect moderate growth in revenue and earnings. The company is estimated to have revenue of about $17.3 billion for the quarter, roughly in line with consensus estimates. IBM’s core software operations are expected to continue driving growth, with software sales growing by 5% year-over-year in Q4. The demand for artificial intelligence solutions in the enterprise space is accelerating, with IBM’s Watsonx platform seeing increased client demand. The acquisition of Red Hat in 2019 has also been a key growth driver for IBM, with its hybrid cloud platform and developer community contributing to growth.
IBM’s stock has seen strong gains in recent years, increasing by 50% from early January 2021 to around $185. While the stock has increased in value each of the last three years, it has struggled to consistently beat the market. Returns for IBM were 6% in 2021, 5% in 2022, and 16% in 2023, compared to the S&P 500’s returns of 27% in 2021, -19% in 2022, and 24% in 2023. IBM’s current market price of about $186 per share is close to 20x consensus 2024 earnings, which is elevated compared to historical levels. Growth is expected to remain muted in the near term, with low double-digit revenue growth forecasted for 2024 and 2025.
Analysts value IBM stock at $177 per share, slightly below the current market price. The uncertain macroeconomic environment, with high oil prices and elevated interest rates, could impact IBM’s performance in the next 12 months. Trefis Portfolio, which consists of 30 stocks, has outperformed the S&P 500 each year over the past three years, suggesting that investing in a diverse collection of stocks may reduce risk and provide better returns. IBM’s business is increasingly focused on cloud computing, AI, and automation, but growth may be limited in the short term.
Despite the challenges, IBM’s consulting business has been performing well, with sales rising by 6% in Q4 to $5 billion. The company continues to gain market share in the consulting industry, even in a tough market for IT spending. The consensus estimates point to low double-digit revenue growth for IBM in 2024 and 2025, driven by the increasing demand for AI solutions. IBM’s valuation and revenue trends are closely monitored by analysts, who are looking for any signs of growth in the company’s core operations. Investors will be awaiting IBM’s Q1 2024 results to see if the company can meet or exceed expectations and continue its growth trajectory in the competitive IT industry.
