IBM Earnings Due Today. Can Tech Giant Keep Rally Rolling?

With a 70% rally over the past 12 months, IBM (IBM) stock is trading at record levels ahead of an important third quarter report late Wednesday.

Shares of the more-than-century-old tech giant known as Big Blue rallied starting late last year, helped by excitement about AI and improvements in the company's revenue growth and free-cash-flow generation.

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On the stock market today, IBM stock is down a fraction at 231.24 in recent action. Shares closed slightly higher Tuesday following a positive earnings report from enterprise technology competitor SAP (SAP)

IBM Stock Q3 By The Numbers

Meanwhile, several Wall Street analysts have upped their estimates for IBM stock ahead of its Q3 report.

Analysts polled by FactSet project that IBM will post adjusted earnings of $2.22 per share for its September-ended quarter, up 24% from the same quarter a year earlier. Analysts project sales will rise 2.2% to $15.08 billion.

BofA Securities analyst Wamsi Mohan in a recent client note reiterated a buy rating for IBM and upped his price target for the stock to 250 from 209.

Mohan said IBM stock's outperformance has been powered by optimism for software business growth, as well as upside from businesses reaching an upgrade cycle for mainframes in 2025.

"Generative AI ($2 billion book of business inception-to-date) is a meaningful opportunity for both consulting (roughly 75%) and software (roughly 25%)," Mohan wrote. "Headwinds include weaker consulting given pullback in discretionary projects and overall soft macro."

Mohan is expecting IBM to report results in-line with earnings and revenue expectations.

What Could Push IBM Stock Higher?

Analysts at Jefferies, meanwhile, have a neutral hold rating for IBM stock. But Jefferies analyst Brent Thill raised his price target for IBM to 245 from 200 in a client note Monday.

"With IBM rallying into the print, expectations will be heightened, particularly around the software and AI narrative," Thill wrote. "From the top-down, IBM remains a slow-moving vessel weighed down by consulting/infrastructure."

For the stock to push higher, Thill said IBM needs its software division to continue outperforming, led by its Red Hat cloud division. Consulting revenue also needs to rebound, he wrote, while AI's contribution to revenue needs to accelerate.

Overall, analysts remain mixed on IBM stock despite the recent rally. Of the 22 analysts following IBM, 10 rate it a buy or equivalent, according to FactSet. Seven analysts are neutral and five rate IBM stock a sell.

IBM Stock: Extended Past Buy Point

Meanwhile, IBM stock is extended past a 196.26 cup-with-handle buy point identified by MarketSurge. Shares broke out past that level on Aug. 21 and have gained steadily in the weeks since.

In early September, shares of IBM notched their first record close in more than a decade. The tech giant has a market cap of $213 billion as of early Wednesday.

The company's stock Relative Strength Rating checks in at 90 out of a best-possible 99, indicating IBM stock has outperformed 90% of the market over the past 12 months, according to IBD Stock Checkup.

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