IBM (NASDAQ; IBM) recently released its first-quarter results, triggering a 7% pre-market stock decline on Thursday, April 24th. Despite reporting a strong year-over-year growth, the results presented a mixed picture.
On the positive side, IBM exceeded consensus estimates for both earnings and revenue. The company reported earnings per share of $1.60, surpassing the estimate of $1.40. Furthermore, its reported revenue of $14.54 billion was slightly better than the anticipated $14.4 billion. Separately, amid tariff worries, What’s Happening With Amazon Stock?
But most importantly, the company’s management stated that the U.S. Department of Governmental Efficiency delayed or terminated 15 federal contracts. IBM’s management acknowledged the strong underlying demand, particularly driven by the booming artificial intelligence sector. Nevertheless, they highlighted the uncertainty created by tariffs, which is causing some customers to become more cautious.
Beyond the specifics of IBM’s results, broader market conditions are also a concern. The current period is marked by growing economic anxieties in the United States, largely stemming from President Trump’s tariff policies. This unfavorable macroeconomic environment poses additional challenges for companies like IBM, and as the management’s commentary suggests, the company is unlikely to be immune. This broader context reinforces concerns that IBM’s stock price could potentially decline to as low as $170 per share.
Here’s the thing: in a downturn, IBM can lose; no, there is evidence, from the recent economic downturns, that IBM stock lost as much as 40% of its value over a span of just a few quarters. Now, of course, individual stocks are more volatile than a portfolio, and in this environment, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Why This Matters Now
Despite the commendable strong growth in IBM’s hybrid cloud software business, which is growing in double-digits lately, significant macroeconomic and geopolitical headwinds warrant attention. While immediate inflation concerns have eased, the current administration’s assertive tariff policies are reigniting these anxieties, potentially leading to future economic instability. This economic uncertainty is further amplified by heightened geopolitical risks stemming from the administration’s policy initiatives, including ongoing trade disputes and strained negotiations with key allies like Canada, Mexico, and Europe, creating a more complex and elevated risk environment.
Concerning Performance Metrics
While IBM stock has indeed outperformed the S&P 500 during certain recent market downturns—an important factor for investors assessing their risk tolerance in today’s volatile climate—this past resilience doesn’t guarantee immunity to the current tariff environment.
While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
How Resilient Is IBM Stock During A Downturn?
Inflation Shock (2022)
- IBM stock fell 17.7% from a high of $142.88 on 6 June 2022 to $117.57 on 12 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 11 November 2022
- Since then, the stock has increased to a high of $264.74 on 20 February 2025 and currently trades at around $225 (pre-market).
Covid Pandemic (2020)
- IBM stock fell 39.0% from a high of $149.08 on 12 February 2020 to $90.97 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 22 November 2022
Global Financial Crisis (2008)
- IBM stock fell 44.8% from a high of $124.79 on 22 July 2008 to $68.86 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 23 December 2009
IBM stock has experienced a fall of nearly 15% from its February high of around $265, primarily reflecting investor concerns regarding the potential impact of tariffs on the company’s business. This downward trend could persist given the prevailing macroeconomic uncertainty. Drawing a parallel with the 2020 downturn, during which the stock fell by 39%, a similar drop could potentially push IBM’s share price below $170.
IBM has demonstrated only a moderate revenue growth, averaging 3% over the past three years, the stock still commands a premium valuation with a price-to-sales (P/S) ratio of 3.6x.
Considering this context, investors holding IBM stock should consider: if the share price were to fall toward $200 or even lower, would you maintain your position or be inclined to sell?
Holding on to a falling stock is not always easy. Trefis works with Empirical Asset Management– a Boston area wealth manager, whose asset allocation strategies yielded positive returns during 2008/2009 timeframe, when the S&P lost more than 40%.
Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? See the last six market crashes compared.
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