Investors in IBM might not be happy about the current IBM stock performance, but growth in revenue could suggest a better future ahead.
International Business Machines Corp (NYSE: IBM) has reported that revenue has grown for the first time in almost six years, which will be good news for anyone that has watched shares in the company drop over the past 12 months. IBM previously faced increased competition and a reduction in demand for their offerings, but looks to be on the right track as far as their core business goes.
Share prices at the end of the third week of January are trading at over $163 dollars on the NYSE, which is a significant improvement over the $151 low that was seen earlier this month. Analysts are warning that stock could decline again in the near future, due to the company expecting a large tax bill at the end of the financial year.
Revenue Growth as IBM Adapts
The good news is that the healthy revenue stream is forecasted to continue throughout 2018, thanks to IBM’s expansion into security services and cloud computing.
In a conference call to investors, Chief Financial Officer James Kavanaugh said that “Tax will be a headwind in 2018.” He did reveal that the company would “maintain a high level of investment”, especially in their high margin business lines. The cloud, mobile, analytics, and cyber security would all be areas of focus for the company moving forward.
IBM has been forced to adapt as their traditional business model based on software and hardware was not suited to current market needs. IBM is one of the most established tech companies in the United States, however, they have been slower to react to changes and have fallen behind other leaders like Apple, Microsoft, Cisco, and many of the other companies that were around for the tech boom in the 1980s and 1990s.
IBM Stock, Strong Short Term Returns Unlikely
Investors may be in for a rough patch with their shares, but long term prospects could be much better than what we’ve seen in recent months. The stock market as a whole has been growing, and once IBM overcomes this year’s tax bill and continues to grow revenue, the share prices should start to pick up again. Although IBM isn’t likely to provide returns in the short term, they have finally proven that they can change their business culture and product lineup to serve the demands of current IT users, and this should provide confidence to anybody who is watching their stock closely.
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