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IBM Could Be One of the Big Turnaround Stories of 2022

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This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.

IBM could be one of the big turnaround stories of 2022. Barron’s highlighted the company’s improving outlook in a recent cover story, calling it “ Microsoft Jr.”

Under CEO Arvind Krishna, IBM (ticker: IBM) has spun off a pedestrian business of managing data centers into  Kyndryl Holdings  (KD), refocused on the cloud and artificial intelligence, and vowed to start growing again for the first time in about a decade.

Wall Street is skeptical about IBM’s prospects, but one bull, BofA Global Research’s Wamsi Mohan, has compared Krishna to Satya Nadella, the Microsoft CEO who transformed the company over the past seven years.

IBM, whose shares trade around $126, is valued at 11 times projected 2022 earnings. And it has the highest dividend yield in the Dow Jones Industrial Average, at 5.3%.

If Krishna is successful in boosting sales and margins while making IBM relevant again, there could be a lot of upside in a largely forgotten stock.

Company / Ticker
Recent Price
YTD Change
2021E EPS
2022E EPS
2022E P/E
Dividend Yield
Market Value (bil)
Amazon.com / AMZN
$3,377.42
4%
$41.11
$51.37
65.7
None
$1,713
AT&T / T
23.71
-18
3.38
3.17
7.5
8.8%
169
Berkshire Hathaway / BRK.A
454,550.00
31
17,466.30
18,928.50
24.0
None
673
General Motors / GM
58.39
40
6.73
6.93
8.4
None
85
Hertz Global Holdings / HTZ
21.01
-22*
4.02
2.55
8.2
None
10
IBM / IBM
125.93
5
10.05
11.04
11.4
5.2
113
Johnson & Johnson / JNJ
173.01
10
9.83
10.38
16.7
2.5
455
Nordstrom / JWN**
20.05
-36
1.27
1.99
10.1
None
3
Royal Dutch Shell / RDS.B
42.82
27
4.86
6.19
6.9
3.9
166
Visa / V***
214.37
-2
5.91A
7.04
30.5
0.7
467

*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.

Source: FactSet

Write to Andrew Bary at [email protected]

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