IBM shares gain the most in 25 weeks on Thursday, quarterly earnings top estimates supported by cloud business growth

International Business Machines second-quarter earnings outstripped Wall Street estimates, driven by strength in the tech giants high-margin cloud business.

IBM shares closed higher for the sixth time in the past ten trading sessions in New York on Thursday. It has also been the sharpest daily surge since January 23rd. The stock went up 4.59% ($6.56) to $149.63, after touching an intraday high at $150.31, or a price level not seen since October 5th 2018 ($151.79).

Shares of International Business Machines have risen 31.64% so far in 2019 compared with a 19.48% gain for the benchmark index, S&P 500 (SPX).

In 2018, IBM’s stock went down 25.91%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

IBMs total revenue shrank 4.2% year-on-year to $19.16 billion during the quarter ended on June 30th, while matching a consensus of analyst estimates.

Revenue from its key cloud business went up 5% year-on-year to $4.8 billion during the second quarter. Still, recent US Dollar appreciation pressured revenue by nearly $500 million.

At the same time, revenue at the companys Global Technology Services unit, which encompasses infrastructure, cloud and technology support services, went down 6.7% year-on-year to $6.84 billion during the latest quarter.

Revenue from IBMs systems business, where the companys mainframe servers and storage hardware are included, registered a 19.5% annual drop to $1.75 billion during the quarter.

Meanwhile, net income attributable to shareholders went up to $2.50 billion ($2.81 per share) during the quarter ended on June 30th from $2.40 billion ($2.61 per share) in the year-ago period.

IBMs earnings per share, which exclude special items, were reported at $3.17 during the second quarter. That compares with a median analyst estimate of $3.07 per share.

Analyst stock price forecast and recommendation

According to CNN Money, the 18 analysts, offering 12-month forecasts regarding IBM’s stock price, have a median target of $151.00, with a high estimate of $173.00 and a low estimate of $115.00. The median estimate represents a 0.92% upside compared to the closing price of $149.63 on July 18th.

The same media also reported that at least 12 out of 20 surveyed investment analysts had rated IBM’s stock as “Hold”, while 6 – as “Buy”. On the other hand, 2 analysts had recommended selling the stock.