When investors expect a stock to grow like gangbusters, any sign of slowing growth can pose problems. But many companies offer decent growth right now, but not necessarily exceptional growth. Such companies can likely deliver strong returns, at least for investors who are patient over time.
That extends to growth stocks. AI is a trend that will take years to play out, much like the rollout of the internet. Investors who are focused on the fastest-growth stocks now are getting hit hard in a pullback.
But for companies that are taking a slow-and-steady approach to growth, like International Business Machines (IBM), the AI trend is pointing to further growth.
The company just beat revenue expectations thanks to software and their AI work. That’s bucking the overall tech trend this earnings season amid some early misses.
Even with shares up 30% over the past year, earnings are up by 73%, suggesting far more upside ahead for IBM shares.
Action to take: Shares likely have some room to trend higher in the months ahead, especially as shares trade at just 18 times forward earnings.
Today’s buyers can also lock in a 3.6% yield on shares.
For traders, the October $200 calls, last trading for about $4.65, could see high double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.