RESEARCH TRIANGLE PARK – IBM is shining brightly on Wall Street even as much of the Big Tech sector suffers huge losses, and a well-known Wall Street investment firms says Big Blue’s acquisition of Raleigh-based Red Hat is a big reason why.
“Shares of International Business Machines Corporation IBM have risen 17.9% over the past three months, driven by healthy revenues on the back of a flexible business model and a quick time-to-market schedule to meet clients’ evolving needs,” Zacks Research says in a new analysis.
The stock hit a 52-week high of $153.21 two weeks ago; its low over the past year was $115.54. Shares are trading Thursday afternoon at more than $141. Shares are up more than 6% for the year – the best performance among what CNBC calls “large-cap tech stocks.”
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In fact, IBM’s “price return performance” is nearly 5% higher than what Zacks defines as the Computer-Integrated Services Market.
Inside the numbers
While tech stocks in general have falling sharply, Big Blue charges ahead. How?
Acks says the reasons are numerous.
IBM (NYSE: IBM) closed on the $34 billion acquisition in 2019 and since then has steadily integrated the Hatters and their technology and services driving growth in cloud-based services. At one point IBM directly assimilated some Red Hat workers into its own ranks.
The strategy is working, Zacks says.
“More than 4,000 clients are utilizing Red Hat and IBM’s hybrid cloud platform. We remain bullish regarding improving the utility of hybrid cloud services based on the architecture built by IBM and Red Hat, by notable clients, including American Express, Bharti Airtel, Vodafone, Banco Sabadell, Broadridge Financial Solutions and Caixa Bank. Red Hat’s expanding foothold across the Asia Pacific is also anticipated to bolster IBM’s TAM (total addressable market).
But as WRAL TechWire reported in an in-depth story from Technology Business Research earlier this week, IBM also has numerous factors working in its favor. Such as making more than 20 acquisitions under the direction of Chair and CEO Arvind Krishna focusing primarily on consulting and services.
Plus, its financials have improved.
“With healthy fundamentals, this … integrated systems provider appears to be a solid investment option at the moment,” Zacks says.
Not to be forgotten as growth factors now and possibly in the future: artificial intelligence, quantum computing and more.
Zacks cites several Growth Drivers
In the report, Zacks lists several other positive signs:
- IBM has evolved as a leading provider of cloud and data platforms.
- IBM is poised to benefit from strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments.
- A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely drive profitability.
- IBM’s research and development (R&D) initiatives set it apart from its peers. On an annual basis, the company invests around 7-8% in R&D to reap the high-growth and high-value opportunities.
- IBM has spun off its legacy Managed Infrastructure Services business in a bid to accelerate its hybrid cloud growth strategy, with a focus on enabling clients with accelerated digital transformation. It has further restructured its segments post the separation of its managed infrastructure services business from Kyndryl.
IBM employs several thousand people at its big campus in RTP and at Red Hat’s headquarters in Raleigh.
Read the full report online at: https://finance.yahoo.com/news/heres-why-ibm-smart-portfolio-134801826.html