Opinions
Jim Cramer - Mad Money
IBM Common Stock
IBM-N
BUY ON WEAKNESS
Apr 25, 2025
Stock price when the opinion was issued
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Premium contentCan a stock that's rallied 36% in the past year be considered a dark horse? IBM can. It outpaced the higher-profile Apple, which climbed 25.5% in the last 12 months and Alphabet by 3%. What is IBM doing right? Software. It's shed its old identity as a stodgy hardware company and tilted hard into software. True, shares dipped last October when they missed their numbers in the consulting segment, but shares jumped this week from $228 to $258 after they reported.
This is the next phase. We've been in this AI growth patch for a while now, which won't end, but quantum is the next level. It answers a lot of the problems that we deal with in the world such as medical issues and cybersecurity.
Problem is, not a lot of developed companies in the space. The industry is quite immature, but sometimes (if you have a longer time horizon) that's where you find opportunities for decent, long-term growth. Unlike AI, quantum needs a lot of space (perhaps it could solve office realty issues). IBM is starting to look more prominent in that space.
Is up 71% since he added it a year ago. Has become more fully valued at 25x PE. Still a great business with modest revenue growth and margin expansion. They benefit from the transition from a consulting business to an software, AI-led. They are emerging as a leading quantum computing play.
It sank 6.6% right after earnings. The market got it wrong--this is a buy opportunity. After a lost decade, they returned to growth a few years ago. They spun off their legacy business and doubled-down on their Red Hat division, essential for AI. Rallied 34% last year, and held up even when AI corrected. YOY revenue was +2%, software +7%, consulting -2% and infrastructure -6%. Bountiful cash flow, though. Also, the reiterated full-year guidance. The quarter and business are good.