If you have been tracking International Business Machines (IBM) lately, there is no shortage of headlines to turn your head. The company has been making waves thanks to its strategic alliance with AMD to build quantum-centric supercomputing platforms. Its flagship Quantum System Two is also turning industry heads. Alongside this, IBM continues to garner praise for its entrenched enterprise AI presence, with several media voices calling out its blend of financial strength, stability, and optionality in a fast-evolving technology landscape.
This flurry of recognition appears to have renewed enthusiasm in the stock. IBM’s shares have quietly risen around 24% over the past year, with most of the momentum coming in recent months following its visibility across major tech conferences and prominent expert commentary on its AI and quantum leadership. At the same time, IBM’s long-term total returns, stretching well over three and five years, outpace many of its mature tech peers. This hints at staying power during a period of accelerating innovation.
The big question now is whether the market’s optimism has already been reflected in IBM’s valuation or if the recent advancements present a genuine buying window for long-term investors.
The dominant narrative suggests that IBM continues to trade below its fair value, fueled by strong assumptions about future growth, margin expansion, and recurring revenues.
IBM’s continued investment in generative AI and integration through acquisitions such as HashiCorp is set to enhance their software capabilities, potentially boosting software revenue and supporting long-term margin expansion through high-value recurring revenue.
Curious about the math powering this bullish perspective? The secret sauce involves bold bets on both earnings momentum and a rich valuation multiple. These numbers are ambitious enough to rival the optimism surrounding top tech stocks. Want to know what financial leap analysts expect to see by 2028 and which efficiency gains underpin this forecast? There are a few surprising assumptions waiting just beneath the surface.
Result: Fair Value of $281.32 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, shifting macroeconomic conditions or client delays in consulting projects could quickly challenge the bullish trajectory that analysts currently project for IBM.
Find out about the key risks to this International Business Machines narrative.
Yet, when we look at IBM’s valuation based on its price-to-earnings ratio compared to the broader US IT industry, a different story emerges. This approach suggests IBM is more expensive than its peers and not undervalued. Is the optimism warranted, or are investors paying a premium for future growth?
