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- Is IBM an Undervalued Dividend Stock? | IBM Stock Analysis
Is IBM an Undervalued Dividend Stock? | IBM Stock Analysis
IBM management has done an excellent job reinvigorating growth in this veteran tech company.
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Video Transcript
IBM's management team has done an
excellent job turning the company around
and given its size and its Legacy it's
hard to turn around a business of this
characteristic interestingly the
analysts on Wall Street are expecting
solid free cash flow growth from this
business but what's a fair price to buy
IBM stock for those of you that are
interested I'll answer that question in
this video and I'll give you a breakdown
of my calculation of how I arrive at
that fair price using my discounted cash
flow valuation model let's jump in I
want to thank the mle fool for
sponsoring this video visit full.com
parev for the 10 best stocks to buy now
so let's start with the section shaded
in green here with the free cash flow
expectations from Wall Street the
analysts that are following IBM's stock
expect its free cash flow will grow from
12.75 billion in
2024 all the way up to 16.78% billion in
2029 I've forecasted that its growth
rate will slow down from that point on
growing from 16.8 billion in 2029 up to
22.45%
so between 2024 and 2034 over the next
decade the forecast is for IBM's free
cash flow to grow from 12.75 billion all
the way up to 22.45%
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inter inter technology to the cloud
technology
so the present value of all of those
free cash flows that IBM is expected to
generate from now into the very long
term is $415 billion that's the value of
operations and the reason we need to
Discount all of those cash flows is
because money in the future is worth
less to us today for a number of reasons
including risk risk and the opportunity
cost of capital so what's the weighted
average cost of capital I'm using for
IBM that number is
8.45% I give the company a cost of debt
of
