Struggling old-school tech giant IBM (NYSE:IBM) reported second-quarter revenues and earnings above expectations, and now IBM stock is rallying in response to those numbers.

Heading into the report, IBM stock was trading just above its 52-week low, so this rally provides some much needed relief for the bulls.

But, is this rally more than that? Could this be the beginning of the big turnaround in IBM stock that bulls have been waiting for?

Unfortunately, I don’t think so. This is still an exceptionally low-growth company with weak go-forward growth prospects. At $150, it seems like IBM stock is fairly priced considering the company’s weak growth outlook. Due to deteriorating cloud growth prospects, I think IBM stock could reasonably get to $160 by the end of the year, but not any higher.

Here’s a deeper look.

IBM Stock Can’t Escape the Slow Growth Narrative

To the company’s credit, IBM did report solid second-quarter numbers.

Revenue growth was 2%, versus flat last quarter and up 1% the quarter before that. Indeed, the 2% revenue growth is the best mark the company has reported in a long, long time, implying that the revenue growth trajectory for this company is improving.

The driver of that improved trajectory? Strategic Imperatives, which is the company’s collection of high-growth businesses from cloud to analytics to security. In sum, IBM’s Strategic Imperatives businesses grew by 13% in the second quarter, which is up from both the previous quarter (+10%) and the year-ago quarter (+7%).

The improved results in Strategic Imperatives have been powered by consistent cloud growth in the 17-18% range, and robust security growth driven by increased demand for cybersecurity solutions.

Both the cloud and security businesses have longevity, so there is reason to get excited about the acceleration in growth in IBM’s Strategic Imperatives business.

But, there is also reason to not be so excited. The security business is ramping from a very small base. As that base scales over time, growth rates will come down, regardless of how big the secular tailwinds are in cybersecurity.

Meanwhile, the cloud business is only growing at a 17-18% clip, which is rather anemic for a cloud business. The whole cloud market is growing at a 20%-plus clip this year, so IBM continues to lose market share to the likes of Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Alibaba (NYSE:BABA).

Worse yet, cloud market growth rates are expected to moderate over the next several years, and fall to 16% by 2021. Thus, IBM’s present 17-18% cloud growth rate will likely also fall to around 12-13% over the next several years.

Overall, while the second-quarter numbers were good, this isn’t the new norm. Growth rates will moderate from here and IBM remains an exceptionally low-growth company.

IBM Stock Isn’t All That Attractive At $150

Revenue growth was 2% in the second quarter.

That is about as high as revenue growth will get over the next five years. Slowing cloud and security growth, the company’s two biggest growth drivers, will inevitably drag on overall revenue growth. Thus, going forward, IBM is a 1-2% revenue growth company.

Gross margins are still falling. But, management’s focus on cost-cutting is allowing the company to bring its operating expense rate down. Thus, pre-tax profit margins actually rose year-over-year in the second quarter.

Sizable and consistent opex leverage will be difficult against the backdrop of 1-2% revenue growth. Nonetheless, I do think it is possible that 1-2% revenue growth creates a pathway for pre-tax margins to get to 20% in five years (versus 17.5% last year).

That combination of 1-2% revenue growth and 20% pre-tax margins leads me to believe that IBM can do about $16.50 in earnings-per-share in five years. The market trades around 16X forward earnings, but the market is also growing earnings at a 16% clip. IBM is growing earnings at a far slower rate, and as such, IBM stock has historically traded around 10X forward earnings, with a five-year high forward multiple of about 13.

A 13X forward multiple on $16.50 implies a four-year forward price target of just under $215. Discounted back by 10%-per-year, that equates to a year-end price target of $160.

Bottom Line on IBM Stock

Using a five-year high multiple, I think IBM stock can get to $160 by the end of the year. Thus, upside from $150 for IBM stock doesn’t look great at the current moment.

Could this stock head higher by the end of the year? Yes. Will it be a big winner? No. How much risk is there? A fair amount.

Putting it all together, IBM stock seems like a fair amount of risk here, and not much reward.

As of this writing, Luke Lango was long AMZN, GOOG and BABA.

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