Should I Buy IBM (IBM)? Finance YouTuber Analysis

The YouTuber advises against buying IBM at its current price, despite its involvement in quantum computing. He argues that the stock is overvalued, trading at 23 times free cash flow, which is a premium for a company with low returns on capital and high debt levels. While acknowledging IBM is a profitable business, he believes the current price does not justify the investment for a reasonable return.

“for me, unless I'm making egregiously high assumptions on that on these levels that I'm not willing to make, it's a pass for Marie right now.”

The speaker bought IBM after Donald Trump mentioned it, noting that he quickly saw significant gains. He implies this is a speculative move based on external mentions rather than fundamental analysis.

“Da hat er ja auch glaube ich wieder IBM z.B. mal erwähnt jetzt. Ne, dann geht die Aktie auch wieder nach oben. Habe ich dann auch mal hin mich mal hinterher gesprungen, bin ich auch jetzt direkt richtig dick im Plus.”

The YouTuber sees IBM as a better value, benefiting from the broader AI infrastructure super cycle and leading in quantum research. He expects the company to report strong revenue growth and potentially upgrade analyst expectations, noting its current valuation is a significant discount to its historical trading.

“International Business Machines ticker IBM may be the better value here with the shares up just 5% over the past year following a stellar 2025. The company is expected to report 7% revenue growth when it releases numbers Wednesday. Again here, I would not be surprised to hear an upgrade to analyst expectations for just 5% sales growth this year and next.”

IBM is presented as a potential 'sleeper stock' due to its decades of AI development and growing business in the sector. Its current valuation of 3.9 times price to sales could be a steal if its quantum revolution initiatives materialize.

“Here besides the decades of development IBM has done in AI and it's growing business there. I showed you last week how the company could be the sleeper stock in the quantum revolution, which would make this 3.9 times price to sales look like a steal.”

The YouTuber identifies IBM as a 'sleeper stock' in quantum computing, highlighting its significant advantages over pure-play companies, including vast cash reserves, microchip fabrication capabilities, and a leading position in quantum computer development. He notes its extremely low price-to-sales ratio of 4x, suggesting quantum potential is 'given away for free.' While growth may be slower than smaller companies, IBM offers more certainty and safety with potentially very good long-term returns if it capitalizes on its quantum lead.

“Here we see trading at just four times on a price to sales basis. Okay, four times versus some of these other stocks we saw 9,000 times a thousand times.”

The analyst recommends IBM as an attractive buy after a recent 14% drop, despite the company beating earnings expectations and boosting its full-year profit outlook. IBM's generative AI business is booming, and the stock is now trading at a discounted 3.7 times price-to-sales, which is 16% below its last quarter's valuation average.

“But the drop has made this one attractive again. Growth is only expected at 6 % this year, which I think gets upgraded and will support the shares which are now trading for just 3.7 times on that price-to-sales basis, a 16 % discount to last quarter's valuation average.”

Despite a recent drop due to profit-taking, IBM is seen as attractive after beating earnings expectations and boosting its full-year profit outlook. Its generative AI business is booming, and the stock is now trading at a 16% discount to its previous quarter's valuation average on a price-to-sales basis.

“Growth is only expected at 6 % this year, which I think gets upgraded and will support the shares, which are now trading for just 3.7 times on that price -to -sales basis, a 16 % discount to last quarter's valuation average.”

The YouTuber suggests International Business Machines (IBM) for its 3% dividend, offering growth potential to offset spending in retirement portfolios. He highlights IBM's stability and cash flow as an older tech company, noting its recent success in leveraging AI services, resulting in a 35% return this year.

“International Business Machines tooker IBM with its 3% dividend is going to do two things for your retirement portfolio first shares of the tech company have stronger growth potential than those utilities bonds or Consumer Staples”

The YouTuber likes IBM for its 3.1% dividend yield, despite a recent stock run-up. IBM is capitalizing on over a decade of AI services development, booking 16% earnings growth last quarter. As a dividend champion with 30 consecutive years of increases, its payout ratio, though currently a bit high, is expected to drop as earnings continue to grow.

“IBM has leveraged more than a decade in building its AI services and is finally able to capitalize on it the company is part of the dividend champions list growing its dividend for 30 consecutive years”

The YouTuber views IBM as a rare value play in the AI adoption theme, trading at just 3.5 times price-to-revenue. He expects IBM to easily beat earnings estimates, given its progressively larger earning surprises in recent quarters and modest sales growth expectations.

“IBM is also benefiting from that AI adoption theme and at just three and a half times on that price to revenue basis is a rare value play in this theme”

While IBM has performed well this year due to its AI focus and is considered a long-term undervalued play, the analyst suggests taking profits in the short term. This is due to the risk that IBM might reiterate warnings on IT spending, similar to Salesforce, which could lead to a stock drop.

“Enterprise AI provider Salesforce Inc ticker CRM shocked the market in May with a warning on revenue and profits then and brought a 20% drop in the stock it's worst day plunge ever now there is a chance that IBM kind of re reiterates that warning on it spending over the next few quarters so I'd be covering my investment and maybe taking some profits in IBM shortterm”

IBM is presented as a value stock benefiting from the AI trend, having prepared for over a decade with its Watson system. Despite lagging some competitors, it's carving out a significant share in the generative AI market. The company generates substantial free cash flow, covering its dividend and buybacks, and trades at a lower valuation than peers.

“IBM here is a cash flow machine generating over $ 11 billion in free cash flow over the last year that's more than enough to pay the $6 billion dividend and buy back 400 million in shares even after the recent 32% run in the price IBM is still trading for about 19 times on a price to earnings basis and 2 and a half times sales versus other Enterprise competitors like Microsoft trading for 36 times earnings and Oracle trading for 29 times earnings and double the price to sales”

The YouTuber suggests IBM for investors seeking a balance between price return and dividend yield. He notes its 3.9% dividend yield and 32% price jump in the past year, attributing its potential to its long-standing involvement in AI, particularly with Watson. Despite lagging some competitors, IBM is carving out a niche in generative AI, generates significant free cash flow, and is still considered a value stock compared to peers, trading at 19x P/E and 2.5x sales.

“International Business Machines ticker IBM not only pays a 3.9% dividend yield but has seen the price jump 32% in the past year and could continue to be your best dividend stock for price and yield”

The YouTuber suggests IBM for its nearly 4% dividend yield and 29 consecutive years of dividend increases, providing reliable income. He argues that despite past underperformance, IBM has strong upside in AI, leveraging its early work with Watson and generating significant free cash flow to support dividends and buybacks.

“International Business Machines IBM with its nearly 4% dividend like the other stocks in this group that 4% dividend isn't going to make you rich but you can count on it to the End of Time.”

The analyst views IBM as a potentially 'undiscovered opportunity' in AI stocks, with a low valuation of 2.6 times this year's expected revenue despite a recent rebound. They believe IBM could surprise the market, exceeding current modest revenue growth expectations of 2.8% this year and 4% next year.

“I believe IBM may be one of the last undiscovered opportunities in AI stocks and could easily surprise the market”

The analyst is following IBM closely, believing it is largely undiscovered by AI investors and undervalued, trading at just 2.9 times sales compared to two or three times that for its peers. IBM is expected to benefit from its Watson coding assistant in addressing technical debt.

“IBM is another one I've been following very closely here and I think it's still largely undiscovered by AI investors after a decade as dead money invest are still hesitant and the shares are trading for just 2.9 times sales versus a valuation of two or three times that for its peers”

The analyst recommends IBM, noting its Watson X AI coding assistant helps clean up technical debt by updating old code. Despite recent share jumps, he considers it relatively cheap compared to other AI stocks, trading at 24 times earnings, and believes its AI services could drive significant revenue.

“IBM is also supporting its customers marketing its Watson X AI coding assistant as a way to clean up that technical debt while shares of IBM have jumped over the last year it's still relatively cheap compared to a lot of the other AI stocks”

The YouTuber is holding IBM, noting its historical underperformance but current strong upside in artificial intelligence, particularly with its Watson system. The company generates significant free cash flow, more than enough to cover its dividends and share buybacks, and the YouTuber has already seen a 39% gain since last July.

“IBM has a strong upside in artificial intelligence. IBM was one of the first on the scene with its natural language AI Watson system in 2010 and has expanded that over the years.”

The analyst highlights IBM as a favorite dividend stock for 2024, citing its 4% yield and attractive valuation at 18 times this year's expected earnings, which is lower than other AI-related names. IBM is a cash flow machine, generating over $11 billion annually, and has assets in AI that could lead to market share gains and surprise investors.

“I highight IBM is one of my favorite dividend stocks for 2024 just in last week's video really on its 4% yield but more that on the valuation in the face of AI upside potential”

IBM is considered a buy despite its historical underperformance, trading at a significant discount (20x P/E, 2.5x sales) compared to peers like Microsoft and Oracle. The company has a long history in AI with its Watson system and is carving out a share in the generative AI market, which could add billions to its revenue. IBM is also a strong cash flow generator, easily covering its 4% dividend and share buybacks.

“IBM is still trading for 20 times on a price to earnings basis and two and a half times sales versus other Enterprise competitors like Microsoft trading for 36 times earnings and Oracle trading for 29 times earnings and double the price to sales.”

The YouTuber suggests IBM as a potential upside surprise, noting its long history as a first mover in AI and the segment's rapid growth. Despite a stagnant stock price historically, its current valuation at 15 times P/E is attractive compared to other AI stocks. A partnership with Salesforce for AI adoption could put IBM back into growth mode, making it a stock to watch.

“IBM has long been a first mover in artificial intelligence and the segment is now one of the fastest growing at 11 year over year in the second quarter the company recently announced a partnership with Salesforce for AI adoption that could the IBM back in growth mode”

Hogue suggests IBM will benefit from the AI revolution by replacing its own workforce with AI and by developing and leasing machine learning software to other companies. He highlights IBM's large employee base and its early move to replace jobs with AI as key advantages.

“IBM has over 288,000 employees so it's going to benefit from not only replacing its own staff with AI but also it develops that machine learning accounting and Consulting software it's going to be able to lease to others like into it”

The YouTuber is wary of IBM due to its long-term stock price stagnation and declining sales and operating profit trends. Despite a lower price-to-sales ratio than Coca-Cola, it's still 22% above its five-year average, suggesting it's not a compelling value given the fundamental issues.

“Honestly, I'm not trying to poo all over these stocks... I think maybe it was just luck of the draw that the first two here are a little expensive when you consider the trend in some of their other fundamentals.”

The YouTuber recommends IBM for its strong 5.1% dividend yield and consistent dividend growth history, despite a high payout ratio. He notes its valuation is in 'value territory' with a 1.5x price-to-sales ratio and a good 12% operating margin. He believes the recent dividend increase signals management's confidence in its ability to sustain payments, and analysts project an 11.5% price upside.

“a very good a very good stock in the tech sector for dividends here next year”

The YouTuber recommends IBM as an 'infrastructure layer' play, highlighting its role as a quantum standard-bearer. IBM is building quantum computers and the operating system (Qiskit) that others use, with over 450,000 developers. They also offer quantum-as-a-service to over 500 corporate clients, setting the benchmark for quantum breakthroughs.

“IBM isn't just building quantum computers. They're building the operating system that everyone else runs on. Their quantum system 2 houses 133 cubit Heron processors in modular racks that can scale up.”

The YouTuber views IBM as a solid choice for quantum computing, acting as an architect, integrator, and facilitator with its Quantum processors and Qiskit framework. While not a 'bright shiny object,' its established nature, healthy financials, and dividend make it a strong contender when demand for quantum computing truly kicks in, despite its diversified portfolio diluting the quantum impact.

“IBM is not a bright shiny object like many of the other companies and I see them as a solid choice in a few years when the demand really begins to kick in for Quantum Computing”

The YouTuber views IBM as a safe hedge due to its long history and established position in quantum computing with its own chips and operating software. While acknowledging its flat stock performance over the past five years, they suggest its quantum efforts could provide future upside, making it a stable, if not explosive, investment.

“I can't say for certain if quantum computers is going to give them massive upside or not but overall they are a very safe hedge with a proven track record.”

The YouTuber considers IBM a 'no-brainer stock' and an 'absolute must' for their portfolio, citing its strong performance in 2022, its five percent dividend, and its pioneering work in cloud, AI, and quantum computing. They believe the quantum computing segment offers tremendous upside potential.

“IBM is one of those no-brainer stock where I think it would be a huge Miss not to carry it”