IBM stock rockets to new all-time high on AI bookings
- IBM stock rose as much as 13% on Thursday, its best intraday price action in more than a decade.
- IBM reported Q4 adjusted EPS of $3.92, 14 cents ahead of expectations.
- AI bookings rose $2 billion QoQ in the fourth quarter.
- Multiple analysts raised their price targets on IBM, impressed by guidance for 2025 FCF.
International Business Machines (IBM) stock surged to its best advance in over a decade on Thursday after the tech conglomerate upended expectations with bookings in the fourth quarter for its artificial intelligence (AI) offerings.
Despite other segments declining in sales from a year earlier, IBM reported 10% annual revenue growth from its software unit, which enticed investors as well.
Both the Dow Jones Industrial Average (DJIA), which includes IBM, and the S&P 500 have advanced about 0.15% on Thursday morning, while the NASDAQ has shed about 0.3% at the time of writing.
IBM stock news
For the fourth quarter, IBM reported adjusted earnings per share (EPS) of $3.92, which was 14 cents better than the Wall Street consensus.
On revenue, IBM reported $17.55 billion in sales, up 1% from a year earlier and in-line with consensus.
RBC Capital Markets was impressed with the result enough to raise its price target on IBM stock from $250 to $276. Analyst Matthew Swanson pinpointed free cash flow, generative AI, and Red Hat growth as the primary reasons for optimism.
The big news was that IBM added $2 billion in bookings to its nascent AI business in just the fourth quarter. That $2 billion mostly came from its consulting business but adds to the total of $5 billion in AI bookings to date.
IBM management expects just 5% revenue growth in 2025 overall, but the market and many analysts are impressed by guidance expecting $13.5 billion in free cash flow for the full year.
Evercore raised its price tag on IBM stock from $240 to $275, retaining its Outperform rating.
Software, however, appears to be the only growth business. It reported $7.9 billion in revenue in Q4, up 10% YoY.
Meanwhile, consulting saw a drop of 2% in revenue YoY. Infrastructure revenue declined nearly 8% YoY, and financing dropped 3% YoY.
IBM stock forecast
IBM flew above prior resistance near $237 on Thursday. Now at a new all-time high, IBM shares interestingly have been circling the 161.8% Fibonacci level near $258. Above there lies the 261.8% Fibo near $277. Below here lies the 100% Fibo placeholder just above $246.
Although there will surely be profit-taking at this juncture, expect a close above $258 to be highly bullish for IBM stock.
IBM daily stock chart
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
