2 More Reasons to Believe in the IBM Stock Turnaround

The company still has lots of work to do, but the worst is in the rearview mirror for IBM stock

By James Brumley, InvestorPlace Feature Writer

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Back in October, I suggested that long-beleaguered technology giant IBM (NYSE:IBM) was finally turning a corner. Specifically, with its mainframe business continuing to fade, IBM was finally getting traction in areas like AI and the cloud. Ergo, IBM stock was a compelling (albeit speculative) buy.

The turnaround story has matured in the meantime, with blockchain currencies being thrust into the limelight — even if in an unhealthy way — and the company’s quantum computing ambitions becoming clearer.

In that these two initiatives will become a key part of Big Blue’s revitalization effort, a closer look at both is merited by anyone that’s been following the saga and mulling a new position in IBM stock.

Big in Blockchain

As a refresher in case you’ve forgotten, during the company’s third quarter of 2017, its “strategic imperatives” projects saw a 10% year-over-year improvement in sales. Its strategic imperatives, by the way, are cloud, analytics, mobile, social and security services. More important, now accounting for 45% of IBM’s revenue, these initiatives are almost in a position to fiscally carry the company.

IBM’s blockchain effort doesn’t handily fit into one of those groups just yet, though given the direction the company has taken it thus far, it will most likely fall under the security and cloud umbrellas.

Contrary to popular belief, blockchain and bitcoin aren’t the same thing. Bitcoin is a currency, and blockchain is the underlying technology that makes it work. The coding needed to make cryptocurrencies secure can also do the same for actual, government-issued currency and is more secure than many other forms of fiscal conveyance.

In fact, in a recent survey taken by Juniper Research, IBM edged out rivals Microsoft Corporation (NASDAQ:MSFT) and Accenture Plc (NYSE:ACN) as the preferred service provider in the nascent industry.

The total size of the blockchain technology market is expected to be $2.3 billion by 2021, but IBM’s vice president of blockchain technology recently commented “a customer that is buying blockchain rarely walks out of the store with just blockchain. They walk out with multiple things in their cart.”

Quantum Leap

It’s not just blockchain setting the stage for a more successful future for IBM. Also working in its favor is a successful foray into quantum computing. Its R&D on this front is also finally starting to pay off too.

Quantum computing is, in layman’s terms, supercomputing on steroids, driven by a whole new kind of way of using the materials one would normally find in a computer processor. These computers require all-new algorithms because they can do so much more than traditional computers have been able to do.

A handful of organizations are already starting to see the value of quantum computing and paying IBM to supply the platform. JPMorgan Chase & Co. (NYSE:JPM) is one of them. The bank is now regularly meeting with IBM in an effort to figure out exactly how quantum computing could be used by a financial outfit.

Risk analysis and security pricing are a couple of the uses that have been envisioned thus far. Like the use of more traditional artificial intelligence platforms, though, engineers are still trying to determine all the ways such a platform might be used and how to fully utilize it.

The market for quantum computing services and products is expected by some to reach $8.5 billion by 2024, which isn’t a game-changing opportunity for IBM. As was the case with its blockchain opportunity, though, it’s not just about the quantum computing market. It’s about everything else IBM can sell to those quantum computing customers.

Bottom Line for IBM Stock

As I explained a couple of months ago, “Whether the pivot has decisively been made or not, CEO Ginni Rometty still has a mountain to climb. It will be slow slogging.” That hasn’t changed in the meantime.

Still, with another couple of modern-era markets on its radar, the revamp effort IBM has taken on looks even more credible than it did just a few months ago. IBM stock remains an interesting prospect not because it’s growing like gangbusters, but because the current IBM stock price still largely presumes the company is a lost cause even when it isn’t.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2017/12/2-more-reasons-to-believe-ibm-stock-turnaround/.

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