International Business Machines Corporation (NYSE:IBM) is another stock that Jim Cramer has continued to stick by, even though the shares have struggled. For more than a year, the CNBC TV host has repeatedly praised the firm for its software business and its quantum computing business. International Business Machines Corporation (NYSE:IBM)’s shares are down by 26% year-to-date and closed a whopping 25% lower on July 14th. Cramer discussed the dip in the stock on Tuesday:
“I mean think about what happened with IBM. . .that’s ringing in people’s heads. IBM was a bell ringer. Especially because Arvind Krishna is one of the most well liked guys ever. For him to be surprised, really good article in the Journal about when he was surprised. That means, if he can surprised and I’m gonna be surprised, I don’t wanna be surprised.”
On the 14th, International Business Machines Corporation (NYSE:IBM) shared a major update. It released its preliminary second quarter earnings, which guided for $17.2 billion in revenue and $2.93 in earnings per share to miss analyst estimates of $17.86 billion and $3.01. As part of the release, International Business Machines Corporation (NYSE:IBM) CEO Arvind Krishna discussed the results. He commented that “We did not adapt and move quickly enough.” The CEO added that businesses had shifted their spending towards hardware purchases such as memory chips, server equipment and storage products. The ‘surprise’ that Cramer discussed referred to the CEO’s admission.
Following the earnings, Citi cut International Business Machines Corporation (NYSE:IBM)’s share price target to $245 from $255 and kept a Buy rating on the shares. Similarly, Argus also cut the share price target. It reduced it to $280 from $360 and kept a Buy rating on the shares. The coverage outlined that while the financial firm was still modelling growth for International Business Machines Corporation (NYSE:IBM), it had adjusted its estimates following the earnings guidance. The growth relates to the firm’s revenue, margin expansion and cash flow.
In his June 4th Mad Money appearance, Cramer discussed International Business Machines Corporation (NYSE:IBM) with regard to a share price drop:
“Oh, okay… look, I think you raised a really interesting question. You said it was up, down, up, down. This stock is up about 80 points in like a week. I think we gotta give it a chance. I want it to come down before I can give it my seal of approval. And I like it very much, but it’s up on a spike, and you know, I don’t recommend a parabolic move… It’s hardly ever worked.”
As for the hedge funds, AQR Capital Management bumped its stake by 121% in Q1 in International Business Machines Corporation (NYSE:IBM) to $455 billion. A notable addition came from Arrowstreet Capital as it disclosed a new $48.7 million stake.
While we acknowledge the potential of IBM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than IBM and that has 100x upside potential, check out our report about the cheapest AI stock.
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