Stock (Symbol) |
IBM (IBM) |
Stock Price |
$138 |
Sector |
| Technology |
Data is as of |
| November 30, 2015 |
Expected to Report |
| Jan 19 |
Company Description |
 International Business Machines Corporation (IBM) is an information technology (IT) company. IBM operates in five segments: Global Technology Services (GTS), Global Business Services (GBS), Software, Systems and Technology and Global Financing. GTS primarily provides IT infrastructure services and business process services. GBS provides professional services and application management services. Software consists primarily of middleware and operating systems software. Systems and Technology provides clients with business solutions requiring advanced computing power and storage capabilities. Global Financing invests in financing assets, leverages with debt and manages the associated risks. Source: Thomson Financial |
Sharek’s Take |
 Investors who were thinking IBM (IBM) had been bottoming got another negative jolt after Big Blue reported earnings last qtr. Although the company met analyst estimates, next qtr’s estimates got gashed. The last 4 qtrs Annual Profit Estimates have dropped from $16.02 to $15.86, $15.73 and now $14.93. The biggest decline this qtr was blamed on the strong dollar, which keeps getting stronger. Instead of buying back stock — the company just issued another stock buyback, of $4 billion — IBM needs to acquire companies thriving in the new economy. Cloud companies, IT outsourcers, mobile computing, data security. IBM thinks it can figure these out on its own, but that’s a slow process, and the company should just acquire instead. Still, the company is making progress and if estimates stop declining the P/E can launch from 9 to perhaps 12, and that’s a 33% gain. IBM could be the ultimate Dog of the Dow for 2016. |
One Year Chart |
 I figured the stock was low around a year ago when it was $150-160, but it just continued to erode. The qtrly profits don’t give me much to work with, so let’s check out the Annual Profits. In 2015 IBM is expected to make $15. But that’s down from around $16 last qtr and around $17 a year ago. So maybe that will continue to come down, that’s what’s spooking investors. If profit estimates rise to $16 and the stock gets a 12 P/E IBM stock would go to $192. |
Fair Value |
 I still don’t think estimates will stop falling all of a sudden. We don’t have hope in the headlines that management is making drastic adjustments. Thus, I have IBM fairly valued at 10x earnings, which is a $151 Fair Value for 2016. |
Bottom Line |
 This stock has done well over the past ten years, considering. This is a real Blue Chip and has gone through rough times — even rough decades — and come back stronger. Eventually management will get it figured out (maybe not this management). But now the big fight is with foreign exchange, and that’s not going away. Still, the P/E of 9 won’t last. Eventually it will rise, and then perhaps the stock will too. IBM could be the best Dog of the Dow in 2016.IBM ranks 30th of 30 stocks in the Conservative Stock Portfolio Power Rankings. |
Power Rankings |
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