3 Reasons This Sleeping Giant Is About To Wake Up

Despite IBM's poor share price performance, there are indications of a promising transformation taking place within the company.

3 Reasons This Sleeping Giant Is About To Wake Up

IBM (NYSE: IBM), also known as Big Blue, has a reputation for trading sideways despite being one of the oldest publicly traded tech companies. Its shares have remained stagnant for long periods of time, with some investors seeing no gains even after years of holding the stock. This trend has continued, with IBM stock currently trading at 2015 levels.

However, looking beyond the surface, there are signs of a new IBM emerging. JP Morgan analysts recognized this transformation over the summer, noting the company's increasing momentum and the growth of the artificial intelligence industry. IBM's recent spinoff of its managed infrastructure services business, Kyndryl, has led to a significant shift in its revenue profile, with over 70% of its revenues now coming from high-growth software and consulting businesses.

Despite these positive developments, IBM still needs to convince Wall Street that it has changed. The company has consistently underperformed compared to its peers in terms of stock performance. However, recent upgrades from analysts, such as RBC Capital, indicate growing confidence in IBM's potential. RBC Capital initiated coverage on IBM stock with an Outperform rating, highlighting the strength of IBM's software platform and its position to benefit from the increasing complexity of networks.

The current price target of $188 from RBC Capital suggests a potential upside of around 30% from the recent closing price. If IBM can reach this target, it would signify a breakout from the 10-year range the stock has been stuck in. Additionally, IBM is considered a good value investment, with CNBC's Jim Cramer noting its affordability and potential for growth.

Since May of this year, IBM stock has already seen a 25% increase and is approaching its highest levels since 2018. This rally has been ongoing since 2020 and is characterized by higher highs and higher lows, indicating the potential for a sustained upward trend.

To confirm the start of the next leg of growth, IBM shares need to surpass last December's peak, which is only 4% away. Investors who get involved now can also benefit from IBM's attractive dividend yield of 4.5%, particularly as the stock continues to show consistent upward movement.