After lowest revenue since 1997, IBM stock sank more than 5%


International Business Machines Corp reported third-quarter earnings on Monday afternoon.

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Shares of International Trading Machines Corp. dove more than 5% in Tuesday’s trading, as the tech company reported its lowest quarterly revenue in more than 23 years.

IBM IBM,
-6.44%
According to FactSet Records, after three months of sales from the first quarter of 1997, its third quarter sales on Monday afternoon stood at $ 7.6 billion. The stock opened at $ 119.80 on Tuesday morning, down 4.6% compared to Monday’s close, and fell as low as $ 117.07 through the morning trading session to $ 118.10, 5.9% lower in the afternoon Eastern time. Ended with

Analysts adulterated their responses to the report, with no rating changes, three price targets rising, and three price-target declines by FactSet. None of the analysts saw a strong path to revenue gains, however, as IBM saw the spinoff of one of its larger divisions and the Red Hat acquisition struggling for its growth.

Chief executive Arvind Krishna said on Monday afternoon that officials “expect permanent mid-single-digit revenue growth when the separation is complete.” However, MoffetNathanson analysts noted that IBM had promised mid-single-digit revenue growth in 2020 and 2021 following the acquisition of Red Hat in 2019, but has yet to succeed in that effort.

“No one could have anticipated an epidemic, of course, but the return of revenue growth has long been an elusive goal for IBM, for example, for several years, with IBM arguing the company’s ‘strategic imperative’ Revealed size and growth rates (which consistently increased double-digit), with the implication that IBM’s revenue growth would naturally turn positive over time, due to mix effects, ”analysts wrote, while sales ratings And retaining the $ 125 price target. “It didn’t happen, and IBM eventually stopped reporting those measures.”

Nevertheless, those analysts say that forecasting revenue-growth is not impossible.

“In our view, that approach – which, according to CEO Arvind Krishna, includes some contribution from M&A – is not a pipe dream, but also not easy,” he wrote.

Profit is also a concern, as IBM faces multibillion-dollar fees for its restructuring.

City analyst Jim Suva wrote, “In the short term we believe consensus Q4 EPS and cash flow will be reduced and there is a risk that seasonal Q4 budget spending may not be fully as it has been in the past. Rating and $ 140 price target.

Most analysts issued a “wait-and-see” approach for IBM, as more details about its path are expected in SpinOff.

UBS analysts maintain a neutral rating, writing, “Given the 12-14 month spinoff time and the necessary restructuring in Q4: 20, investors will likely” write-off “the rest of the CY20 and CY22 formal estimates . ” $ 125 price target.

“Overall, we think investors get a better understanding on Rayman and Spin-Co (need more financial statements), b) clarity around the $ 2.3B cost reduction plan and how it flows to the bottom line. Will wait for a) c) the path of software revenue stabilization (below mid single digit pre-RHT) and d) changes in capital allocation and shaping M&A as we move forward, ”said Evercore ISI analyst Amit Daryani Wrote while maintaining a hold rating and decreasing its shortfall. Price target from $ 137 to $ 135.

Overall, four of the 15 analysts tracked by FactSet consider IBM to be a buy, while nine stocks equal one hold and two recommend selling shares. Tuesday morning’s average price was $ 136.54, according to FactSet.

IBM shares have fallen 8.5% so far this year, as the Dow Jones Industrial Average DJIA,
+ 0.55%,
Which counts IBM as a component, has gained 0.6%.

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