As the economy recovered and customers reverted to many of their old behaviours, tech companies that had prospered during the Covid era suffered the most. IBM is one of just two American tech companies worth $50 billion or more that have produced profits so far in 2022. Stock was up 6% for the year as of Friday’s close. VMware, which agreed in May to be acquired by Broadcom for $61 billion, is the other gainer with a 5% increase. Investors turned to 111-year-old IBM, betting on its solid profitability, alongside energy stocks like Exxon Mobil, health-care brands like Merck, and industrials Northrop Grumman and Lockheed Martin, while Meta, Amazon, and Tesla were pounded.
Bernstein Research analysts wrote in a note to clients on Dec. 20 that IBM’s deal was “well above its historical range.” The company has a stock holding rating. No one would confuse IBM with a growth stock. Expansion has been in the single digits across the board, and last year the company spun off its managed infrastructure service business, his Kyndryl, into another publicly traded company. This has reduced the number of employees by approximately 90,000. But IBM generated $752 million in free cash flow last quarter, up 25% year-over-year, and paid a dividend of $1.5 billion. Both third-quarter earnings and sales beat expectations, prompting the company to raise its full-year guidance.