IBM Stock Has a Sleeping Giant in Watson Health

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If you’ve been watching IBM (IBM) stock recently, odds are you’ve been pretty underwhelmed. Shares of the old-school tech giant hit fresh five-year lows earlier this month, and in the third quarter, revenues fell for a 14th consecutive quarter.

IBM Stock Has a Sleeping Giant in Watson HealthIt sounds like a business in decline, and it is. But IBM’s savvy investments in the cloud, analytics, healthcare — and the convergence of the three — are poised to pay off big time.

Big Blue, while it has the image of an antiquated, slow-moving blue chip with little breakout potential, has been quietly doubling down on Watson Health (a division of Watson, its cognitive computing initiative).

Currently trading at just 9 times earnings and 1.6 times sales, IBM stock is an absolute steal at current levels, if only for the enormous value that Watson Health could one day unlock.

Accelerating Progress, Smarter Treatment

IBM is setting itself up to benefit from the regulations that companies in the pharmaceutical, biotech and medical device industries must meet.

Needless to say, those three fields generate hundreds of billions in revenues each year, so if Big Blue eventually becomes one of the go-to enterprise solutions providers for these industries, IBM stock should soar.

That’s precisely what IBM is doing with a recently announced expansion of Watson Health, called IBM Watson Health Cloud for Life Sciences Compliance (PDF). The service will help biomedical companies bring their products to market more quickly as IBM ensures its infrastructure is what the Food and Drug Administration calls “GxP compliant.”

A little obscure, yes, but if it works as advertised, IBM stock owners should be pleased as life sciences companies like Gilead (GILD), Pfizer (PFE), Amgen (AMGN) and many others use IBM’s technology to speed up their processes and become more efficient.

A recent video accompanying an IBM news release touted the incredible utility of Watson Health’s new features:

“Procuring and qualifying infrastructure and validating systems to the GxP on your own can take months, or even longer. With IBM Watson Health Cloud for Life Sciences Compliance, you can reduce this time down to hours by having access to qualified cloud infrastructure and tools on demand.”

This truly is a win-win-win. Patients win by getting access to quality medical products faster, life sciences and medical device companies get to make money more quickly and IBM also gets to line its pockets.

That’s not to mention how IBM stock owners, and shareholders in the companies IBM Health serves, will benefit.

Newly installed Chief Health Officer of IBM Health, Kyu Rhee, has also vowed to focus on making IBM’s health solutions more readily available to health professionals.

Watson Health recently partnered with Apple (AAPL), giving users the option to have health data wirelessly collected from their Apple Watch, where it’s then sent over the cloud for data analysis that their healthcare providers can use.

Additional partnerships with CVS (CVS), Johnson & Johnson (JNJ) and Medtronic (MDT) also ensure that IBM is deeply ingrained in the future of healthcare.

So yes, IBM stock may be going through a rough patch as it pivots into new fields like analytics, AI, the cloud, healthcare and the synthesis of those areas. But I’m not going to fault Big Blue for shifting its focus to the world of tomorrow, which IBM itself is actively helping to create.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/ibm-stock-price-watson-health/.

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