New
Why Ibm Stock Was Up 14% Today
International Business Machines (NYSE: IBM) stock soared 13.6% through 11:10 a.m. Thursday morning after the tech giant beat on both sales and earnings last night.
Analysts had forecast IBM would earn $3.78 per share, adjusted for one-time items, on $17.54 billion in sales for its fiscal fourth quarter of 2024. Instead, IBM reported a $3.92 per share adjusted profit. Its sales were $17.56 billion.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
Fourth-quarter earnings
Not all of IBM's news was great. Sales for the quarter grew a bare 1%, and sales for the full fiscal year were up only 1.5%. Earnings for the quarter, while better than expected, still declined 13% year over year, as calculated according to generally accepted accounting principles (GAAP), to just $3.09 per share. GAAP earnings for the year suffered worse, down 21% to $6.43 per share.
Nevertheless, IBM considers the quarter a success. CEO Arvind Krishna talked about double-digit revenue growth in software and highlighted the fact that "our generative AI book of business now stands at more than $5 billion inception-to-date, up nearly $2 billion quarter over quarter."
You read that right. Despite all the worries about DeepSeek this week, IBM still wants investors to think of it as an artificial intelligence stock.
Is IBM stock a buy?
But perhaps that's not a bad thing? After all, IBM says it generated $12.7 billion in positive free cash flow in 2024 -- twice its reported $6 billion in GAAP net income. And profit margins are ticking up as well. In the fourth quarter, the company grew its operating profit margin 50 basis points (by non-GAAP measurements), and non-GAAP margins were up 130 basis points for the full year.
And turning to guidance, management says it's expecting to grow revenue at least 5% this year, and to grow free cash flow modestly, to $13.5 billion -- on a $239.5 billion market capitalization that values IBM at about 17.7 times this coming year's free cash flow.
That's cheaper than a lot of other tech stocks these days. I just don't think it's cheap enough, if IBM is growing sales by only 5%.
Should you invest $1,000 in International Business Machines right now?
Before you buy stock in International Business Machines, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and International Business Machines wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $758,099!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 27, 2025
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool has a disclosure policy.
