Is International Business Machines Stock Outperforming the Dow?

IBM +1.77% ^DJI +0.61%

International Business Machines Corporation (IBM), headquartered in Armonk, New York, provides integrated solutions and services. With a market cap of $284.6 billion, the company offers analytics, IT infrastructure, cloud, business operations and automations, cybersecurity, data storage, application development, asset management, blockchain, software, and consulting solutions.

Companies worth $200 billion or more are generally described as “mega-cap stocks,” and IBM definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the information technology services industry. IBM's strengths include its global footprint and reputation for innovation in AI, cloud, and mainframe tech.

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Despite its notable strength, IBM slipped 6.7% from its 52-week high of $324.90, achieved on Nov. 12. Over the past three months, IBM stock gained 25%, outperforming the Dow Jones Industrials Average’s ($DOWI) 4.4% gains during the same time frame.

In the longer term, shares of IBM rose 37.9% on a YTD basis and climbed 32.5% over the past 52 weeks, notably outperforming DOWI’s YTD gains of 11.5% and 5.7% returns over the last year.

To confirm the bullish trend, IBM has been trading above its 200-day moving average over the past year, with some fluctuations. The stock is trading above its 50-day moving average since mid-September.

IBM's outperformance is driven by its advancements in quantum computing, including the 120-qubit Quantum Nighthawk processor, aiming for quantum advantage by 2026 and fault-tolerant computing by 2029. The company's AI and automation demand is fueling growth, with software ARR up by 12.2%, AI book of business exceeding $9.5 billion, and automation portfolio up over 22%.

On Oct. 22, IBM shares closed up by 1.9% after reporting its Q3 results. Its adjusted EPS $2.65 exceeded Wall Street expectations of $2.44. The company’s revenue was $16.3 billion, surpassing Wall Street's $16.1 billion forecast.

In the competitive arena of information technology services, Accenture plc (ACN) has significantly lagged behind the stock, with a 31.8% loss on a YTD basis and a 29.6% downtick over the past 52 weeks.

Wall Street analysts are reasonably bullish on IBM’s prospects. The stock has a consensus “Moderate Buy” rating from the 22 analysts covering it. While IBM currently trades above its mean price target of $289.62, the Street-high price target of $360 suggests an 18.7% upside potential.

On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com