Despite Missing the Quantum Rally, IBM's Stock Could Still Be Your Ticket to Riding That Hot Trend

Wall Street’s growing excitement over quantum computing as the next major investment trend, following artificial intelligence, appears to have largely overlooked IBM. According to Melius Research analyst Ben Reitzes, this oversight is a mistake.

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While companies like Google parent Alphabet Inc., Quantum Computing Inc., Rigetti Computing Inc., D-Wave Quantum Inc., and IonQ Inc. have seen their stock prices soar recently, IBM has not enjoyed similar attention.

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Alphabet, for instance, saw its shares rise 17% in the fourth quarter after announcing advancements in quantum computing with its Willow processor earlier this month. This progress also sparked rallies in other quantum computing-related stocks, such as Quantum Computing Inc. and D-Wave Quantum Inc.

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In contrast, IBM’s stock has risen only 4% over the same period, despite its deep involvement in quantum computing. Reitzes highlighted this disparity in a research note, pointing out that “no one’s talking about IBM Quantum,” even as other quantum stocks experience substantial gains. He argued that IBM likely has the most comprehensive quantum computing capabilities over the long term, even compared to Alphabet.

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Reitzes has reiterated his buy rating on IBM, valuing its stock at approximately $255 per share, significantly above its closing price of $228.97 on Tuesday. While IBM’s current quantum initiatives are not yet a major factor in its valuation, Reitzes views the company’s expertise in this field as a significant long-term advantage and an “added bonus.”

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IBM has been at the forefront of quantum computing since the 1980s, pioneering this advanced technology that relies on qubits—tiny data units capable of representing both 0 and 1 simultaneously. This unique characteristic enables significantly faster processing than traditional computing methods.

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Reitzes anticipates that IBM’s quantum computing efforts could generate billions of dollars in revenue and profit by the 2030s, with the technology reaching material financial relevance by 2029. He also predicts that IBM will primarily offer quantum computing as a hosted service, integrated with its established technical and consulting practices. One notable application of this service could be enhancing the security of cryptocurrencies.

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IBM is expected to shed more light on its quantum computing strategy during an analyst day scheduled for February 4. According to Reitzes, quantum computing has the potential to revolutionize numerous industries and tackle some of humanity’s greatest challenges. “Perhaps with IBM’s assistance, quantum will help cure cancer or help us live on Mars,” he remarked, underscoring the transformative possibilities of the technology.

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In conclusion, while IBM’s stock has lagged behind other quantum computing players in recent months, its decades of expertise and leadership in the field position it as a key player in the long term. For investors, this could represent an undervalued opportunity as quantum computing continues to gain traction as a transformative technology.

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