IBM Stock Should Rise Again on This Growth Catalyst
International Business Machines Corp. (NYSE:IBM) announced its first-quarter results this week, and investors couldn’t see beyond its continuous streak of losses, as the company’s revenue declined again.
Even the upbeat earnings could not stop the five-percent slide in the price of IBM shares on Wednesday.
So, should you consider putting your money into IBM stock? Could it reward you handsomely?
Here’s something to consider: IBM has a top-notch artificial intelligence (AI) platform called “IBM Watson,” which is one asset that should just keep growing over the coming years. AI is already an integral part of our digital lives, and it could become a normal part of pretty much everything in our lives, thanks to Watson.
IBM has been trying to turn itself around by investing heavily in AI and cloud businesses. These are two of the top lucrative markets, and IBM’s presence and growing expertise in these areas should lift the IBM stock price.
For investors looking to reap the rewards from AI, one of the biggest technology trends of today, IBM stock could be a good place to park money. Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Google parent company Alphabet Inc (NASDAQ:GOOG) are the better-known names in AI, yet IBM continues to make its mark quietly.
The Growing Potential of AI Bodes Well for IBM Stock
IBM stock is one of the best ways to play the theme of AI in the markets today. With the power of IBM Watson, the company’s leading AI platform, the company is targeting sectors like healthcare and finance, where the potential for gains is huge.
For example, consider IBM’s deal with Crédit Mutuel. IBM’s Watson will assist the 20,000 customer advisors of Crédit Mutuel across France. This will enhance the quality of service for 12 million customers. (Source: “Crédit Mutuel and IBM Watson Put Technology at the Service of People,” International Business Machines Corp., April 20, 2017.)
A solution like IBM’s e-mail analyzer could help financial advisors manage more than 350,000 customer e-mails that they receive every day. With help from the Watson-based solution, the bank would be able to identify the most frequent requests and determine their urgency levels in order to enhance their customer responses.
Just imagine if Watson technologies were to be deployed by more and more banks and financial institutions across the world; the future growth potential could be huge for IBM stock.
Another well-known deal was made last month, when IBM and salesforce.com, inc. (NYSE:CRM) entered into a global partnership to deliver joint solutions designed to leverage AI technology. IBM Watson and salesforce.com’s “Einstein” could help companies enhance customer engagement across a number of areas. Results from these efforts should start bearing fruit for IBM stock.
But, probably most important of all, IBM is disrupting the healthcare industry with its Watson AI platform. Watson can assist healthcare professionals and doctors in the treatment of their patients. “IBM Watson for Oncology,” for example, can help in the treatment of cancer.
Surely and steadily, Watson is making inroads into the healthcare industry and, when it explodes, IBM stock investors will likely be well rewarded for their patience.
Bottom Line on International Business Machines Stock
IBM Watson is one of the most underappreciated assets of the company, which is going through a difficult and long turnaround phase. But these are the times when long-term investors get a golden chance to buy into solid, high-potential businesses.
In the first quarter, both the IBM cloud and cognitive solutions posted strong growth. And this trend is likely to continue in the future. The only concern is whether the growth from these areas will be high enough to stem the company’s overall losses.
Moreover, IBM continues to spend a large amount of money—about almost four percent of the company’s revenue—in research and development (R&D) efforts. This, however, is one factor that would improve financial results in the long term, and it demands more patience from investors.
For those patient investors, there could be big rewards. IBM will keep expanding Watson to cater to a number of industries like healthcare, finance, manufacturing, etc. and will keep growing bigger. IBM stock may be out of favor right now, but it has all the potential to make a grand comeback.