IBM's Stock Reaches a 10-Year High Due to Optimistic AI Prospects


IBM's shares soared nearly 13% to reach a level not seen in over a decade, fueled by an impressive revenue outlook driven by high demand for its artificial intelligence (AI) services. The company's generative AI business, encompassing services like those powered by its Watson AI platform, witnessed a remarkable doubling of orders in the fourth quarter. This surge is expected to contribute to a 4%-6% growth in revenue for IBM in 2024.

Key players in IBM's AI-related bookings include consulting firms and software companies, with Germany's SAP SE being a notable contributor. IBM's Chief Financial Officer, James Kavanaugh, highlighted that these collaborations played a significant role in the strong performance.

IBM's shares reached $196.89, marking their highest point since June 2013 and adding around $20 billion to the company's market capitalization. The stock experienced an almost 11% increase, setting it on track for the most substantial daily percentage gain since March 2020.

Following this positive development, at least eight Wall Street analysts, including those from Bank of America, JPMorgan, Jefferies, and Evercore, raised their price targets for IBM's stock. Despite the surge, the median price target remains at $144.50, unchanged from the previous month, and the average recommendation stands at "hold," according to LSEG data.

Currently trading at about 17 times its expected earnings for the next 12 months, IBM's stock compares favorably to its historical average of 14 times. In contrast, peers in the industry are trading at approximately 20 times their earnings, as per LSEG data.

JPMorgan analysts, led by Brian Essex, raised their price target to $190 from $170 in a note to investors. They noted that while IBM hasn't experienced the valuation boost seen by some technology peers in the AI sector, recent multiple expansion trends below primary comparisons might change this perception.

In summary, IBM's robust performance in the AI sector has significantly boosted investor confidence, leading to a surge in its stock value and positive reactions from analysts.

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