Will IBM Bounce Back in 2014?

This year hasn't been kind to shares of IBM (NYSE: IBM  ) . The Dow component is trailing the broader market badly, and could end 2013 as the single worst stock in the group.

IBM Chart

IBM data by YCharts

But does next year hold more promise for IBM investors?

In the following video, Fool contributor Demitrios Kalogeropoulos tries to answer that question. He goes over the tech giant's recent performance and notes that the company has seen some particularly bad results in emerging markets. Still, profitability is holding up, the company is generating billions in free cash flow, and it's on track to boost earnings by 25% in two years. Those fundamentals point to an attractive valuation that could prime IBM shares for a solid 2014.

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Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On December 07, 2013, at 1:10 PM, iamgarce wrote:

    I like your thesis , but i think that your timeline is a

    bit long ... IBM is certainly not new the "cloud" ..

    to wit:

    Through the mid 60's , IBM's business was largely

    service , leasing equipment and/or services .

    The USG got after IBM and said that they must

    make their equipment available for sale . The

    execs had a good laugh and said "sure, why

    not , nobody will by a large computer" . then they

    went into hypergrowth in hardware . That era

    ended badly with execs missing distributive processing and the rise of servers .

    By 2000 , IBM was buzzing about a cloud , they

    came out with 2nd city, which turned out to be

    a learning experience .

    Now , things have come full cycle and computer

    services are being viewed at a utility .. again ..

    IBM is no stranger here .

    Cloud computing will be huge , linked with "big

    data" and IBM will thoroughly dominate .

    What is currently passing for "the cloud" a la

    Amazon .. is not really cloud computing and such

    applications are mainly for consumer commerce ,

    which is an area that IBM has eschewed for

    it's lifttime .. IBM will be proving cloud solutions

    for enterprise , medical and scientific at the

    business and research levels ...

    At this juncture , IBM is in transition phase .. it's just a matter of how long that takes ... IBM's fortunes could turn dramatically during 2014 and

    by 2015 will be on it's way to dominance ..

    what happens to the stock price will be a function

    of investor psychology until real returns are

    evident and during 2015 we should see share

    price in the high 200's .... garce

  • Report this Comment On December 09, 2013, at 1:08 PM, cabinhillfarmboy wrote:

    So do I buy now or look at results fhrough a few quarters in 2014? The stock looks expensive for a small time investor like myself. It's down about 35 in the last year, so I would hope it might come back.

    I'm hesitating because there is competition and I'm wondering about another company with more room for growth. But the dividends are attractive.

    Advice??

    YankeefaninVermont

  • Report this Comment On December 09, 2013, at 4:55 PM, TMFSigma wrote:

    @Garce, thanks for the comment, I agree that IBM has a shot at a much better 2015 than this past year would suggest!

    @YankeeFan - I think there are a lot of worse places you could put your money. IBM is a huge, diversified tech giant that has a long future ahead of it -- which is one big reason why it's a member of the Dow. Dividend payers like this also help you accumulate shares, and they can soften the blow from a stock drop like IBM has seen lately. It really depends on your particular investing tastes, but IBM should appeal to conservative investors that think the company can return to sales growth in the coming quarters.

    Best,

    Demitrios

    @TMFSigma

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