• IBM’s shares experienced an impressive surge of over 13% to reach a 10-year high, driven by a strategic emphasis on artificial intelligence (AI) services.
  • Wall Street analysts increased IBM’s price estimates, but analysts’ recommendations remain mixed.

International Business Machines (IBM) shares surged by almost 13% to reach a level not seen in over a decade on Thursday. This significant increase followed the company’s announcement of a revenue outlook that exceeded expectations, supported by robust demand for its artificial intelligence (AI) services.

Strong Q4 performance and strategic AI focus

At a climax of $196.89, the highest price for IBM shares since June 2013, the company’s market value increased by over $20 billion. The company disclosed a 4% increase in fourth-quarter revenue on Wednesday, totaling $17.4 billion. This growth was attributed to robust demand and additional investment made in their AI services.

The bookings and sales from IBM’s generative AI business, which is driven by its Watsonx AI platform, are predicted to contribute to the company’s revenue growth in 2024 by 4% to 6%. According to an IBM representative, the business will hire more people for positions focused on AI in 2024 while laying off some workers. As a result, the headcount will probably remain mostly unchanged by the end of the year.

The 111-year-old business has restructured itself under CEO Arvind Krishna, leveraging a larger drive for AI integration across sectors and concentrating on software and consultancy.

“A notable edge for IBM is its consulting arm in AI, which, coupled with its increasingly relevant AI software solutions…positions it favorably against competitors,” according to a Global X ETFs analyst, May De.

Also read: IBM targets $2.3 billion acquisition deal with Software AG

Hearing them out

Following the sharp increase in shares, at least eight Wall Street analysts – including those from Bank of America, JPMorgan, Jefferies and Evercore – increased their price estimates for IBM’s shares.

As of the latest data from the London Stock Exchange Group (LSEG), the median price target among the 20 analysts covering IBM remains at $144.50, unchanged from the previous month. Their collective recommendation, on average, is to “hold” the stock, meaning they are not strongly advising investors to buy or sell IBM stock at the moment.

JPMorgan analysts, led by Brian Essex, raised their price target for IBM from $170 to $190. They express the view that IBM hasn’t experienced the same valuation gains from AI as some of its technology counterparts. IBM’s recent increase in stock valuation has generally lagged behind key industry benchmarks.

Also read: IBM to Integrate Meta’s Llama2 into Watsonx