“Awakening the Giant: 3 Compelling Reasons IBM is on the Verge of Resurgence”

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Unlocking the Potential: IBM’s Impending Resurgence

Key Highlights

IBM’s history includes prolonged periods of sideways trading.
Recent trends suggest an upward momentum.
Factors like AI and a shift in revenue profile could be game-changers.

IBM, often referred to as “Big Blue” on Wall Street, is a tech giant with a mixed reputation. Despite being one of the oldest publicly traded tech companies, dating back to its IPO before the moon landing, IBM’s stock has a notorious history of trading sideways for extended periods.

By 1982, 14 years after going public, IBM’s stock still lingered at its IPO price. Remarkably, it returned to this price point in 1994. Even during the Dot Com bubble in 1998, investors who bought IBM shares had little to show for it a decade later.

Fast forward to today, and it appears that IBM’s old habits die hard. Its stock has been meandering around 2015 levels for years. At first glance, it’s tempting to write off IBM as a tech relic destined for the annals of history. However, a closer look reveals a different story.

Embracing Technological Transformation

Analysts are pointing to IBM’s ongoing transformation, which is gaining momentum. The rise of artificial intelligence (AI) as a thriving industry is providing significant tailwinds. Notably, IBM recently completed the spinoff of its managed infrastructure services business, Kyndryl. Consequently, more than 70% of its revenue now comes from high-growth software and consulting, aligning it more closely with tech giants like Amazon.com, Inc. and Oracle Corp.

It’s worth acknowledging that IBM still has ground to cover to convince Wall Street that a new era is underway. Historically, the company has lagged behind its peers in stock performance. But it’s evident that IBM is making concerted efforts, and analysts are taking notice.

Bullish Outlook

This week, RBC Capital initiated coverage of IBM stock with an Outperform rating, citing the strength of IBM’s software platform. In a world where networks are growing increasingly complex post-pandemic, IBM stands to benefit significantly from this shift. The price target of $188 implies a potential upside of around 30% from recent levels. Achieving this target would signify a substantial breakthrough from the stock’s decade-long trading range.

Another enticing aspect of IBM is its current affordability. Jim Cramer pointed out on CNBC that “IBM is very inexpensive,” indicating a potential for significant growth. In many ways, it has already been on an upward trajectory since before summer.

Promising Technical Setup

Since May of this year, IBM’s stock has surged by 25%, nearing its highest levels since 2018. This rally, which effectively began in 2020, stands out considering IBM’s tendency to trade sideways. It’s characterized by consistent higher highs and higher lows, elements that often underpin sustained rallies.

To signal the beginning of the next leg, IBM’s shares need to surpass the peak from last December, a goal that’s merely 4% away. Additionally, investors will enjoy one of the best dividend yields in the big tech sector, currently standing at 4.5%. This becomes especially attractive as IBM’s stock continues its steady climb in recent months.

In conclusion, while IBM’s historical stock performance might not inspire immediate confidence, there are compelling reasons to believe that the company is on the verge of a renaissance. The confluence of technological transformation, bullish sentiment from analysts, and a promising technical setup suggest that this tech giant is poised for an impressive comeback. Before considering other investments, keep an eye on IBM—it might just be the sleeping giant that’s about to awaken.

Note: For the most accurate and up-to-date investment advice, it’s advisable to consult with a financial professional.