Please ensure Javascript is enabled for purposes of website accessibility

Why International Business Machines Corp. Stock Soared 15.6% in March

By Timothy Green - Apr 7, 2016 at 11:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The IT giant is still posting lackluster results, but investor sentiment may finally be shifting.

Image source: IBM.

What: Shares of International Business Machines (IBM 1.88%) surged 15.6% in March, according to data provided by S&P Global Market Intelligence. There wasn't any specific news driving the stock higher, but after slumping for the past three years, investor sentiment may have finally turned around in March.

So what: IBM has suffered from declining revenue in each of the past 15 quarters. The company is attempting to transform itself, shifting resources to areas like cloud computing and analytics. Meanwhile, legacy businesses are shrinking, and along with negative currency effects, the end result is a string of nasty quarterly results. During the fourth quarter of 2015, which IBM reported on in January, revenue tumbled 9%, and non-GAAP EPS sank 17%.

Shares of IBM bottomed out in February, hitting a 52-week low of about $117 per share, down over 40% from early 2013. Since then, the stock has surged, powering its way back to about $150 per share, with a big chunk of that gain coming in March.

IBM Chart

IBM data by YCharts.

Nothing has really changed about IBM's story, but pessimism surrounding the stock may have simply become too extreme. Despite the challenges facing IBM, the company is still a cash machine, generating $13.1 billion of free cash flow in 2015. At the 52-week low, the total market capitalization was less than 9 times this number.

Now what: IBM's transformation is still a work in progress, and 2016 will almost certainly be another tough year, in part due to continued currency headwinds. But the gains in March may be a sign that the market no longer believes that IBM is doomed. Or it could just be a fluke, with IBM riding a rising stock market higher.

Either way, IBM investors will need to continue to be patient as the company slowly turns itself in a new, and hopefully highly profitable, direction.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

International Business Machines Corporation Stock Quote
International Business Machines Corporation
$136.12 (1.88%) $2.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.