Opinions
Mohsin Bashir
IBM Common Stock
IBM-N
BUY
Oct 30, 2013
Stock price when the opinion was issued
You might be interested:
Is up 71% since he added it a year ago. Has become more fully valued at 25x PE. Still a great business with modest revenue growth and margin expansion. They benefit from the transition from a consulting business to an software, AI-led. They are emerging as a leading quantum computing play.
Has owned it in the past. When he held this at $180, the market was ignoring IBM's AI business and saw low growth. So, he bought it. IBM teamed up with Meta to enhance their Watson franchise. He made good money. Then, he started to see the PE rising into the 20s, and Accenture and other peers reported weak results. So, he exited and wouldn't re-enter.
Starting to get back into the really exciting parts of technology somewhat. Doesn't have the growth he's looking for, only 6-7% growth and paying 21x PE. In the tech space, you really want to see 10-20% earnings growth. Trendlines have been decent, but now down to 200-day MA (could be a buying opportunity, but not for him).
It has transformed into a hybrid cloud and AI company. Software does remain the engine. Has $7.5 billion in AI related business. Margins are quietly improving with strong cash flow. Yield is 2.7%. It is a real contender in the quantum race. She sees 18% upside potential and in the longer run of 12 months 27%. Buy 8 Hold 10 Sell 2
(Analysts’ price target is $283.05)
Has had softer quarters recently creating lower stock prices. Have some opportunities down the road. Recently announced a significant increase to their share buybacks, which is good for the near-term in keeping the stock at a certain floor level. Concerns on shifting over to Cloud along with other competitors are giving them some challenges, but they have the capacity to handle this. Their ability to stick handle the next few quarters will be challenging but current downturn is a longer-term buying opportunity. (See Past Top Picks and Top Picks.)