International Business Machines Corporation (IBM) is down nearly 7% Thursday morning after the company’s third-quarter earnings result left much to be desired in the eyes of investors.
Despite posting a net loss of $330 million, IBM’s adjusted earnings came in at $2.30 per share, well ahead of the $2.22 analysts were expecting.
This time last year the company posted a profit of $1.7 billion or $1.84 per share. On a non-adjusted basis, the earnings for this quarter were a loss of 36 cents per share. This accounts for the $2.7 billion non-cash pension-settlement charges incurred in Q3.
Revenue grew just 1% year over year to $15 billion. $6.5 billion in the software business was a highlight for the company, as this was a 10% improvement from this time last year. Software now makes up roughly 45% of IBM’s revenue.
However, the consensus called for $15.1 billion in revenue – and although IBM beat the expectation for software sales specifically ($6.4 billion), sales as a whole were a let down.
Still, the company was upbeat about a few segments – like its open-source cloud products segment, which grew 14%. Automation solutions climbed 13% in the quarter while data and AI revenue showed a 5% improvement.
Chief Executive Arvind Krishna tried to steer focus towards the AI ROI, as the company has invested heavily in this emerging technology and is finally starting to reap the benefits. Krishna said its solutions are “trusted, fit-for-purpose, and lower cost, with performance leadership.”
But with all the improvements in software came disappointments elsewhere. Consulting revenue stayed stagnant while infrastructure revenue fell 7%.
Shares of IBM have been rallying in the right direction heading into this earnings update, with an 18% gain over the past 3 months. The stock is still up more than 33% through 2024 so far. But is today’s sell-off an overreaction, or is it really time to take profits on this stock and move on?
We’ve taken a closer look at IBM in the VectorVest stock software and found 3 things that will help you make your decision one way or the other.
IBM Still Has Good Upside Potential and Timing With Fair Safety
VectorVest simplifies your trading strategy by delivering clear, actionable insights in just 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each sits on a scale of 0.00 to 2.00 with 1.00 being the average, allowing for quick and easy interpretation. This saves you time and stress while helping you win more trades. It gets even better, though.
The system also issues a buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. As for IBM, here’s what you need to know:
- Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a far superior indicator than the typical comparison of price to value alone. IBM has a good RV rating of 1.13.
- Fair Safety: The RS rating is a risk indicator. It’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 0.96 is a bit below the average but still considered fair for IBM.
- Good Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. Even after today’s reversal, IBM has a good RT rating of 1.20.
The overall VST rating of 1.11 is good for IBM, and the stock is currently rated a HOLD in the VectorVest system. But if you want a closer look, we’ve put together this free stock analysis to help you trade with complete confidence and clarity. Don’t miss out on this opportunity!
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Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.
VectorVest advocates buying safe, undervalued stocks, rising in price. IBM has lost 7% so far today after investors were left wanting a bit more in yesterday’s earnings update. While software as a whole and specifically AI is promising, it wasn’t enough. The stock still has good upside potential and timing with fair safety, though.
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