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IBM (NYSE: IBM) crossed into uncharted waters yesterday as the tech stock reached $200 a share for the first time in its history.
Already the third-largest tech stock after Apple (Nasdaq: AAPL) and Microsoft (Nasdaq: MSFT), IBM has been on a tear of late. It’s up 9% in 2012 and 27% since an August 19 low of $157.54.
Despite its meteoric rise, IBM isn’t overpriced. The stock is trading at just over 15 times trailing earnings and 12 times forward earnings. The company has increased its profits each of the last three years. Its revenue increased 7.1% to $106.9 billion in 2011.
Most importantly, it is outpacing rivals such as Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ) by broadening its portfolio of products to include software, services and hardware operations among its offerings. The company has done so by flexing its financial muscle, acquiring over 120 companies since 2000. That makes for a highly diversified revenue stream.
As IBM continues to expand, many analysts say that $200 a share is far from a ceiling. Despite the company’s already impressive size, it will continue to grow – just as it has for the last 100 years. That’s why value investors such as Warren Buffett still own the stock, and why brokerage firm Stern Agee has set a price target of $230 a share.
So while hitting the $200-a-share milestone is a major accomplishment for “Big Blue,” the tech stock is well positioned to achieve even bigger numbers.