Tony Ciero, CFA and CFP IBM Common Stock IBM-N SELL Aug 01, 2025

Is a quantum computing play, Watson AI is a tailwind and Red Hat is monetizing as well as leading in AI.

She bought it when it was trading at 12x PE and yielded over 5%. Diversifying away from mainframe computers to cloud and AI will raise growth in the future. 

Has owned it in the past. When he held this at $180, the market was ignoring IBM's AI business and saw low growth. So, he bought it. IBM teamed up with Meta to enhance their Watson franchise. He made good money. Then, he started to see the PE rising into the 20s, and Accenture and other peers reported weak results. So, he exited and wouldn't re-enter.

He expects a boring report next with fantastic numbers, including EPS. The Red Hat integration is working.

Starting to get back into the really exciting parts of technology somewhat. Doesn't have the growth he's looking for, only 6-7% growth and paying 21x PE. In the tech space, you really want to see 10-20% earnings growth. Trendlines have been decent, but now down to 200-day MA (could be a buying opportunity, but not for him).

Their last quarter wasn't that bad, and now the shares are an opportunity. We will be talking about IBM and quantum computing. IBM has a great software package, too. Yes, the chart is bad, but the fundamentals are right.

It's not true that they are stodgy, old tech. They've gotten into AI with Watson, and done an alliance with Meta. What's holding them down in consulting, which is low-growth. He sold it recently. There are more predictable stocks like Meta and Amazon.

It has transformed into a hybrid cloud and AI company. Software does remain the engine. Has $7.5 billion in AI related business. Margins are quietly improving with strong cash flow. Yield is 2.7%. It is a real contender in the quantum race. She sees 18% upside potential and in the longer run of 12 months 27%.           Buy 8  Hold 10 Sell 2

Purchase of Red Hat really put them in the cloud and data centre business, saved them. Over last couple of years, execution of business plan was perfect. But more recently, especially in Q2 earnings, execution faltered. He's been adding in the $240 area. 12-month price target of $314.