Should You Pick IBM Stock At $250?

Core Insights - IBM reported Q4 revenue of $17.6 billion and adjusted earnings of$3.92 per share, surpassing consensus estimates of $17.5 billion and$3.75 respectively, driven by strong demand for AI solutions and robust performance in its software business [1][3] - The stock surged over 8% following the results announcement, reflecting a 45% return since the beginning of 2024, outperforming the S&P 500 index which is up 27% [2][5] - IBM's software sales grew by 10%, while the infrastructure segment declined by 8%, consulting sales fell by 1.1%, and financing revenue decreased by 2.5% [3] Financial Performance - IBM's Q4 revenue showed a 1% year-over-year growth, with Data & AI solutions and Red Hat products leading the growth, with Red Hat products seeing a 16% year-over-year increase [3][4] - Adjusted operating margin increased by 50 basis points to 60.6%, contributing to earnings of $3.92 per share, which is a 1$13.5 billion in free cash flows in 2025 [5] Market Position and Future Outlook - IBM is focusing on capitalizing on the rising demand for AI in the enterprise space, introducing Watsonx to help clients deploy customized AI models [4] - Despite the strong performance, IBM is considered fully valued at around $250, trading at 3.7x trailing revenues compared to its average P/S ratio of 2.2x over the last five years [7] - The company has consistently increased its stock value over the past four years, but has not consistently outperformed the market [5][7]