IBM (NYSE: IBM) stock price has pulled back sharply in the past few weeks as the recent bull run fades. It has retreated in the past four straight weeks and moved to its lowest point since February 20th. That means that the stock has plunged by over 8.75% from its highest level this year, meaning that it is nearing moving into a correction. 

IBM is bracing for a highly important week as the company is set to publish its quarterly financial results on Wednesday. These results will provide more information about whether its business is growing as it did in 2023 when its total revenue jumped to over $61.1 billion from $59.8 billion in 2022.

IBM has also become a highly-profitable company. Its total net income jumped to over $7.5 billion in 2023, up from $1.6 billion a year earlier. Its net profit in 2021 and 2020 stood at over $5.7 billion and $5.59 billion, respectively.

IBM has benefited from the ongoing tailwinds as its consulting and software portfolio does well. It has also become a major player in the artificial intelligence (AI) business with the launch of watsonX, which helps companies to train, tune, validate, and deploy AI models.

The most recent financial results showed that its total revenue rose to $17.4 billion in Q4 while its free cash flow moved to $6.1 billion. Software, consulting, and infrastructure revenue rose by over 2% during the quarter.

The estimate is that IBM’s revenue rose to $14.5 billion, up from $14.25 billion in the same quarter in 2023. They also expect that the company’s revenue will come in at $15.83 billion in Q2, a 1.60% increase from the same period in 2023.

IBM’s earnings per share (EPS) is expected to come in at $1.59, higher than $1.36 a year earlier. I believe that the company will publish stronger results than expected as companies continue boosting their investments.

The key catalysts for the IBM share price will be the company’s forward guidance and market share in the cloud computing industry. They will also focus on the progress of its artificial intelligence business.

Analysts are generally optimistic about IBM stock, with an average target of $188.24, higher than the current $181. However, those at UBS have recently downgraded the stock to sell, citing its valuation and slow growth.

IBM chart by TradingView

The daily chart shows that the IBM share price has been in a strong bearish trend in the past few days. It has moved to the 23.6% Fibonacci Retracement level and remained below the 50-day moving average for fix straight days. 

IBM has also formed a small head and shoulders pattern, which is a bearish sign. The Relative Strength Index (RSI) has continued to form a bearish divergence pattern and is hovering above the oversold level. 

Therefore, the outlook for the stock is neutral with a bearish bias. Weak financial results will lead to more downside, with the next target being the 38.2% retracement point at $167.75. The alternative scenario is where the stock rebounds and retests the year-to-date high of $199.25.

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