It’s been a reasonably frustrating 2018 for IBM (NYSE:IBM). IBM stock has declined almost 5% so far this year, despite some good news.

A stunning 23-quarter streak of declining revenue finally came to an end with Q4 results in January. Q1 numbers and Q2 numbers both beat Street estimates on the top and bottom line. And yet IBM stock largely has been left out of the tech rally, even touching a two-year low in late June.

There are reasons for caution. As Luke Lango wrote early this year, growth simply isn’t good enough at the moment. Key end markets like AI and cloud are expanding quickly, and rivals ranging from Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) to Amazon (NASDAQ:AMZN) to Salesforce.com (NYSE:CRM) are growing much faster than Big Blue.

IBM’s Strategic Imperatives revenue is growing nicely — up 15% over the past four quarters, per the Q2 release — but it’s only half of revenue. And with a consolidated revenue growth figure in the low single digits, that in turn suggests that legacy businesses are declining double digits.

Still, all hope is not lost. I’m personally long IBM through a hedged options strategy, and below $150, I think IBM stock looks attractive.

At the moment, IBM stock is priced for essentially zero profit growth. That’s certainly a possible outcome, but one in which investors still enjoy a 4%+ dividend. And if IBM can gain some significant traction in terms of revenue growth and margins, there’s a chance for real upside here.

Concerns for IBM Stock

With IBM stock trading at about 11x earnings, it might seem like the downside is protected. That’s not necessarily the case, however. IBM admittedly doesn’t need to grow to keep the stock afloat. But earnings here can decline if performance weakens.

Again, about half of revenue is going in the wrong direction. And that puts some pressure on newer businesses to drive revenue growth. Verticals like security, cloud and AI have done so in the last three quarters, but against easy comparisons.

As those categories have to lap tough compares — cloud revenue is up 20% over the past four quarters in constant currency, for instance — growth rates of the “good” businesses may slow. And that very well could send IBM back into revenue declines in 2019.

The other issue is on margins. IBM plunged after Q1 owing to margin concerns, but it showed improvement year-over-year in the second quarter. Cost cutting should help in the back half as well.

Still, there’s a broad concern that IBM is losing its “good” revenue — in categories where it was the industry leader — and swapping it out for tougher sales in verticals where it’s just a face in the crowd.

The shift from mainframes to cloud, for instance, moves IBM from a dominant market to one where it lags Amazon and Microsoft (NASDAQ:MSFT). That limits pricing power and potentially hits margins. With some leverage on the balance sheet, that pressure will be amplified in terms of net income and earnings per share as well.

Risk/Reward for IBM Stock

That said, I do think there’s some downside protection here. A dividend yield doesn’t necessarily provide a floor for a stock (see similar old-line companies like General Electric (NYSE:GE) or Ford (NYSE:F)), but it can provide some near-term support. I’d be stunned to see IBM’s yield clear 5%, at which point the stock would have to dip toward $125, about 14% downside.

And, again, IBM isn’t pricing in growth. If the company winds up muddling through and trading margins for revenue growth, that still suggests reasonably flat performance from IBM stock. Investors benefit from a 4.3% dividend yield in that scenario as well.

Meanwhile, if IBM can execute on a turnaround, there’s enormous potential upside. We’ve seen this type of story play out at Microsoft and Intel (NASDAQ:INTC). Both seemed like tech giants left behind. Both managed to pivot into new businesses, and drive their stocks higher. Oracle (NYSE:ORCL) faces a similar fork in the road as the move to cloud undercuts its platforms.

IBM stock isn’t quite “heads I win, tails I don’t lose much.” But it does seem like the company should be able to at least keep earnings relatively flat. Cloud growth has been impressive. Mainframes have come back. Watson AI has had mixed performance but still has promise.

The Case for IBM Stock

Below $150, I do think the risk/reward for IBM is attractive. If the turnaround stumbles, IBM stock can decline, but it’s already pretty cheap. And if it gains traction, the stock can rise in a hurry. If IBM starts posting earnings growth, and investors believe that growth will be consistent, this easily can be a $200+ stock. And 15x something like $15+ in 2020 EPS would get IBM over $225.

That’s not guaranteed by any means, but it’s possible. And given what looks like acceptable downside risk, it makes IBM worth the wait for patient investors.

As of this writing, Vince Martin has a hedged bullish position in IBM options. He has no positions in any other securities mentioned.