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Buy the Dip in IBM Stock After Q1 Earnings?
IBMIBM(IBM) ZACKS·2025-04-24 22:45

Core Viewpoint - IBM's stock experienced a 6% decline despite surpassing Q1 expectations and maintaining full-year revenue guidance, although it remains up 4% year-to-date, outperforming many tech peers [1]. Group 1: Q1 Financial Performance - IBM reported Q1 sales of 14.54billion,exceedingestimatesof14.54 billion, exceeding estimates of 14.44 billion and slightly up from 14.46billionyear−over−year[3].−TheQ1EPSwas14.46 billion year-over-year [3]. - The Q1 EPS was 1.60, down from 1.68ayearagobutbeatingexpectationsof1.68 a year ago but beating expectations of 1.42 by 12% [3]. - Free cash flow for Q1 reached a multi-year high of 2billion,markingastrongcashgenerationperformance[3].−IBMhasexceededtheZacksEPSConsensusfornineconsecutivequarters,withanaverageearningssurpriseof7.92 billion, marking a strong cash generation performance [3]. - IBM has exceeded the Zacks EPS Consensus for nine consecutive quarters, with an average earnings surprise of 7.9% in the last four quarters [3][4]. Group 2: Full-Year Guidance - IBM maintained its full-year revenue growth guidance of 5% or more, projecting revenues of approximately 65.09 billion, which is above market expectations [5]. - The company forecasts further revenue growth to 68.73billionnextyear,indicatingacontinuedpositiveoutlook[5].−IBMalsouphelditsfull−yearfreecashflowguidanceof68.73 billion next year, indicating a continued positive outlook [5]. - IBM also upheld its full-year free cash flow guidance of 13.5 billion, a slight increase from 12.95billionin2024[7].Group3:ValuationandMarketPosition−IBM′sstockiscurrentlytradingaround12.95 billion in 2024 [7]. Group 3: Valuation and Market Position - IBM's stock is currently trading around 230, reflecting a forward earnings multiple of 22.8X, which is near the S&P 500 benchmark but significantly higher than the Zacks Computer-Integrated Systems Industry average of 11.3X [9]. - The stock's premium valuation compared to peers like Advanced Micro Devices (AMD) and Micron Technology (MU) suggests a strong market position [9]. Group 4: Analyst Sentiment - IBM currently holds a Zacks Rank 3 (Hold), indicating a neutral outlook, with potential for upside depending on positive earnings estimate revisions in the near future [11].