3 Reasons to Avoid IBM and 1 Stock to Buy Instead

Adam Hejl Fri, June 26, 2026 at 12:40 PM EDT 3 min read **

• IBM
• ^GSPC

3 Reasons to Avoid IBM and 1 Stock to Buy Instead Over the past six months, IBM's shares (currently trading at $258.55) have posted a disappointing 15.3% loss, well below the S&P 500's 6.2% gain. This may have investors wondering how to approach the situation.

Is now the time to buy IBM, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it's free.

Why Is IBM Not Exciting?

Even with the cheaper entry price, we don't have much confidence in IBM. Here are three reasons we avoid IBM, plus one stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company's long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, IBM's 4.5% annualized revenue growth over the last five years was mediocre. This was below our standard for the business services sector.

IBM Quarterly Revenue

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company's potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect IBM's revenue to rise by 4.8%, close to its 4.5% annualized growth for the past five years. This projection doesn't excite us and suggests its newer products and services will not lead to better top-line performance yet.

3. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company's growth is profitable.

IBM's EPS grew at 6.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

IBM Trailing 12-Month EPS (Non-GAAP)

Final Judgment

IBM isn't a terrible business, but it isn't one of our picks. Following the recent decline, the stock trades at 20.9× forward P/E (or $258.55 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn't great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We'd recommend looking at the Amazon and** PayPal of Latin America.

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