IBM Downgraded at Cowen

Moshe Katri, analyst at Cowen and Company downgraded shares of IBM IBM from Outperform to Market Perform with a price target of $165. “Our downgraded reflects Q-Q declines in a number of important demand metrics, including net project workloads, project execution and bench skill base levels,” the analyst wrote in an equity research report. Katri noted “Big Blue's” poor performance throughout 2013 which lead to his bearish views. The company has consistently missed consensus expectations. The company has also seen a weaker bottom line due to negative foreign exchange exposure from the Japanese Yen. The company also performed poorly in emerging markets such as China and Brazil. The analyst performed a survey of five global vendors and found that IBM's position declined from top of the list in June 2013 to third place in November. Project execution/delivery declined 1,000 BPTS from June, and Bench/skill base was down 500 BPTS from June. The company is operating in an extremely competitive environment. “Stiff competition from the India centric vendors could have a detrimental impact on both revenue growth and margin levels,” Katri noted. Katri believes that shares are justified at a lower valuation compared to the S&P 500. IBM is trading at 10X projected CY2014EPS, below the S&P 500's 15X. “In our view, a lackluster outlook for top line growth, combined with Street's appetite for high-beta, “growth” names could cap IBM's multiple.” The analysts target reflects an expected negative return of 6.3 percent based on December 6th opening price.