UPDATE: Stifel Reiterates Buy Rating, Lowers PT on International Business Machines Corp. Following 3Q Revenue Report

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In a report published Thursday, Stifel analyst David Grossman reiterated a Buy rating on
International Business Machines Corp.
IBM
, but lowered the price target from $230.00 to $220.00. In the report, Stifel noted, “IBM reported 3Q revenue of $23.7bn (down 2% cc), substantially below consensus of $24.8bn, and EPS of $3.99, which was above consensus of $3.96. A lower tax rate (17%) contributed $0.30 to 3Q EPS, though IBM has always viewed the tax rate as an operational lever. The core issues were substantial underperformance in the Growth Markets (GMU's down 5% versus +1% in June, China particularly weak and accounted for over ½ of IBM's y/y revenue decline), continued declines in the hardware segment (-16%) and some modest underperformance in the software unit (+2%). Services was largely in line with improving momentum in the GBS unit (+5%, closest comp to ACN) and modest improvement in GTS (-1%). While we were cautious going into the quarter, revenue performance was weaker than we expected and the stock traded down 5-6% last night. While we have high conviction in the $20 EPS target for 2015, it seems unlikely the stock qualifies to be re-rated until there is better visibility on revenue growth improving. That, in turn, suggests the stock is range bound pending potential catalysts in Mar-Jun 2014 when GMU comps ease and new management has time to effect change, China regains momentum and new hardware products are on the horizon.” International Business Machines Corp. closed on Wednesday at $186.73.
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Posted In: Analyst ColorPrice TargetAnalyst RatingsDavid GrossmanStifel
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