2013 is the Year of Conservative Stocks. So far, IBM (IBM) hasn’t taken part in the festivities. After it reported first quarter earnings, the company lowered expectations a bit, business isn’t banner. Still, this company has an estimates long term growth rate of 10% a year, plus pays a dividend of around 3%. With profits up every year during the last dercade, this stock is worth 15 times earnings. Right now the P/E is only 11. Big Blue is due for a big move.
One Year Chart
IBM dissapointed investors after it reported earnings on April 18th, and the stock fell from $207 to $190. Company sees weakness ahead, and estimates fro the next two quarters dropped a bit (as did annual estimates). But Big Blue rebounded in a big way, and is now trading at $208.
Note Estimates show only 8% and 9% profit rowth coming the next two quarters. And since IBM missed by a nickel last quarter, 8% and 9% is realistic. The stock might not have enough momentum to break out past $217. For now, its in a trading range and I think we can get another chance to get in around $190.
Fair Value
Conservative Blue Chips are having a banner year in 2013, and I feel so much money its coming in to these stocks that IBM could push forward in a big way the next two years. $275 is my 2014 Fair Value.
Sharek’s Take
IBM is one stock I’m looking to purchase for clinets at any time. This stock has an 11 P/E and I feel the company will be rewarded with a 15 P/E . The P/E was 14-16 during 2005-2007, so I’m not asking for much. The stock even had a higher P/E earlier in the decade (19 in 2003 and 18 in 2004). I think the time is right for Big Blue to make a big move higher. Right now its in a trading range and with the market being overbought all year, we are due for a correction. IBM is one stock I would look to get into on the next dip.
View the Earnings Table here.View the Ten Year Chart here.
