IBM’s (IBM) volume on Monday was 19.52 million, 2.9 times higher than its 30-day average. This surge in volume led to a standard deviation of -3.46, the 15th-highest among bearish price surprises in yesterday’s trading. IBM stock finished the day down 13.15%.
The move lower extends the tech giant’s losses in 2026. It’s now down over 24% and 31% from its Nov. 11, 2025, 52-week high of $341.90. While its shares have risen nearly 82% over the past five years, the current tech selloff suggests that IBM’s stock’s best days could be over.
If you’re an options trader, IBM’s increased volatility makes it an attractive target for short-term profits. Over the past year, its shares have lost 5% or more in a single day of trading on 10 occasions.
The stock’s daily options volume over the past 12 months has gotten much heavier in February. Of the 10 highest days in the past year, three have been this month: 293,583 on Feb. 12, 144,508 on Feb. 19, and 121,056 yesterday, double its 30-day average.
IBM’s volatility may soon fall as it becomes clear to investors that the 15% tariff President Trump announced to replace those imposed through the International Emergency Economic Powers Act (IEEPA), but made unlawful by the Supreme Court’s Friday ruling, is only for 150 days.
Further, the refunds companies seek for duties paid under the old tariffs could be an economic accelerant if they’re actually able to claw them back in the months ahead.
It begs the question: Are IBM’s best days over? I’ll consider both sides of the argument.
Warren Buffett’s Berkshire Hathaway (BRK.B) first acquired IBM shares in November 2011 when the holding company bought 64 million shares at an average price of $170, an outlay of $10.7 billion.
It became one of the investor’s worst stock ideas in a 70-year history of buying and selling stocks. By the end of Q1 2018, Buffett had completely exited his IBM position. IBM’s share price at that time was around $147, so it has gained about 52% in the nearly eight years since.
That doesn’t include dividends. The dividend yield averaged approximately 4.3% over those eight years, according to Morningstar.com. That’s a total return of 10.7%, 366 basis points less than the SPDR S&P 500 ETF Trust (SPY). Berkshire did much better with Apple (AAPL), which it still holds, albeit a much smaller stake than it once had.
Most of IBM’s gains since then were generated in less than three years between May 2023 and November 2025, when its shares went from $120.55 to $341.90, a 184% gain in 30 months, or nearly 74% annualized. Even accounting for the price decline in 2026, its annualized return is still up 37.6% annualized over the past 30 months.
It could be that IBM is a value play worth buying on the dip.
That’s the million-dollar question.
Analysts are lukewarm about IBM stock. Of the 22 covering it, 11 rate it a Buy (3.73 out of 5), with a $320.38 target price.
Of course, IBM is not the only tech business with a bruised and battered share price in 2026. Software stocks have been caught up in a vice-like death grip thanks to AI. The iShares Expanded Tech-Software Sector ETF (IGV) is down 27% year to date. While it does hold IMB, it’s considered a proxy for software stocks.
The most recent shock to IBM stock was Anthropic’s launch of its Claude Code Security tool this past Friday, which Anthropic suggests could deliver a better, updated version of COBOL, the computer language IBM uses on its mainframes.
I’m admittedly not a tech guru, but this latest knock on IBM stock appears to be AI hype rather than something that could put IBM out of business.
In early 2026, Oppenheimer analyst Param Singh named IBM one of his top picks for the year, with an Outperform rating and a $360 target price. He sees its overall revenue up 6% in 2026, with a 9% increase in software revenue, which accounted for 44.4% of its 2025 revenue, 120 basis points higher than a year ago.
“‘We believe IBM will positively surprise the bears on its earnings through the year, driving upside to the stock,’ Singh said,” Barron’s reported the analyst’s Jan. 8 comments.
One financial metric I always consider is a company’s free cash flow [net cash from operating activities less capital expenditures]. In 2025, on a non-GAAP basis, IBM’s free cash flow was $14.73 billion, 15.5% higher than a year earlier. In 2026, it expects free cash flow to increase by $1 billion, or 6.8%, less than half the growth a year ago.
But here’s the thing: IBM started fiscal 2025 by projecting a 6.3% growth rate for free cash flow; it came in more than double that estimate. Along the lines of the Oppenheimer analyst’s thinking, the company is likely being conservative. It wouldn’t surprise me if free cash flow were up double digits again in 2026.
So, based on a current enterprise value of $259.1 billion, its free cash flow yield is 5.7%. Based on $2 billion in free cash flow growth in 2026, its free cash flow yield increases to 6.5%.
I consider FCF yields between 4% and 8% to be fair value. Its valuation isn’t super cheap, but it’s definitely not expensive.
Here are three ways you can play IBM’s 2026 dip:
1) Buy its stock at current prices,
2) Buy IBM call options to bet on better times ahead, or
3) Consider ETFs such as First Trust NASDAQ Technology Dividend Index Fund (TDIV) or FT Vest Technology Dividend Target Income ETF (TDVI), which are tech funds with a focus on stocks paying dividends. Both hold IBM in the top 10.
I don’t believe IBM’s best days are over. So, whatever choice you make, if you hold for 3-5 years, you’ll be happy with the outcome.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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