Opinions Jim Cramer - Mad Money
IBM Common StockIBMBUYJan 31, 2025
Jim Cramer - Mad MoneyStock price when the opinion was issued
As of Jul 31, 2026. Market Open.
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We had these stocks that were growing off of AI, and they've been delivering spectacular growth. But they've also had spectacular increases in share prices, which becomes a potential source of volatility.
The question is whether valuations are too high given projected growth? As we've seen here, some of the price adjustments can be pretty abrupt.
Big into AI, huge into quantum. Checks all the boxes. Last earnings (April 22) were a bit of an execution slipup. He has a full position right now (4.5%). Buy here, add around $270, and again at $255. Yield is 2.43%.
(Analysts’ price target is $298.18)
Kim Bolton
Growing from multiple angles, yet valuation still reasonable. Stable and embedded business complemented by new growth drivers. Consulting business helps companies implement AI, and that's where the real spending is. Strong in hybrid cloud, managing data across environments. Quantum computing already being used with potential for energy, healthcare, manufacturing.
Drop in February due to sector rotation and profit taking. Trades ~19x PE, attractive. Sees 30% upside from here to ~$317. Yield is 2.85%.
Brianne Gardner
(Note the short timeframe.) Still likes. Fundamentals remain strong. Pullback is attractive entry point. Core story remains hybrid cloud/AI. Emerging as a leader in quantum. Continued earnings growth. About 28% upside from here.
Brianne GardnerHold on to it. At 4-5% growth, in the ballpark of the top players. He doesn't know its exposure to robotics. Street's pretty positive on it, about 20% upside. At 20x PE, not an aggressive valuation. Margins expected to stay healthy -- 60% gross margins, net income margins of close to 20%.
(Analysts’ price target is $314.00)
It just reported great numbers and shares jumped 13%. Redhat has made this an AI winner. It rallied 34% last year. They've had 6 straight quarters of positive sales growth, leading to an earnings beat and excellent free cash flow. Their full year forecast includes accelerating revenue growth and free cash flow. YOY growth: infrastructure -8%, consulting -2%, software 10% which is the largest segment, amounting to 43% of 2024 revenues. Software got stronger as 2024 wore on, and this segment could make up 50% of IBM's business. Specifically, Red Hat grew 16% YOY in Q4 and automation 15%. Watson X and Red Hat are key growers, enjoying the AI tailwind. Their GenAI business generates over $5 billion of business, growing by $2 billion, quarter-over-quarter. That said, shares went sideways last October given a miss in their consulting business, but the CEO feels AI will return this segment to growth in 2026. Tailwinds: a good backlog, record signing in Q4, and business in GenAI all support accelerating growth in low-single digits. Caveat: their PE is 24x PE and 22x in 2026, instead of around 10x, but their return to steady growth justifies the PE and software will generate more recurring revenue. An indirect AI play that won't be hurt by DeepSeek.