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PreMarket Prep Stock Of The Day: IBM

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PreMarket Prep Stock Of The Day: IBM

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One of the worst-performing technology stocks during the sector's multi-year rally is International Business Machines (NYSE: IBM). On Thursday, the company announced a measure to unlock value in the company, making it the Premarket Prep Stock Of The Day.

Peaked In March 2013: IBM made its all-time high in March 2013 ($215.90) and ended the month near that level at $213.30. It has been in a prolonged downtrend ever since.

From its all-time high to its current price of $133, the issue has had a negative return of 36%, or a tad less if dividends are taken into consideration. Over that same time period, the S&P 500 index has yielded a 119% return, while Apple Inc. (NASDAQ: APPL) has increased by 576%.

Buffett Throws In The Towel: In 2011, Berkshire had amassed a 64-million share stake worth $10.7 billion at an average price of $170 per share.

At the end of 2017, Warren Buffett, through Berkshire Hathaway, owned only 2 million shares of IBM at a higher average price than its year-end close of $165.99. By May 4, 2018, the firm had completely exited the issue.

It's difficult to determine his exact price, but assuming it was done during March or April, the trading range over that time span was $144.11-$162.11.

Interestingly, while the firm was selling off its large IBM stake, it was beginning to acquire a large one in Apple.

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Range-Bound Over The Next Two Years: While the technology sector led the broad market higher and higher, IBM was stuck in a trading range from May 2018 until now. For the most part, the issue has traded between $105 and $150, with the two outliers being its February 2020 high ($158.75) and its March 2020 low ($90.56).

The March low was its lowest level since March 2009 in the midst of the financial crisis, when it bottomed at $83.02.

EPS Beats Overshadowed By Revenue Shortfall: One would think that as horrible price action the issue has had, it would be reflected in its earnings over the last. Believe it or not, the company has had only three EPS misses or inline reports going back to the first quarter of 2012.

However, revenues have been an entirely different story and that is what the Street has punished the issue for. Over that same time period, it has had come up shy on revenues in 19 of the 34 quarters.

Desperate To Unlock Value: Before today's open, the company preannounced third-quarter revenue, which is expected to be a little higher than expected and inline EPS. The company also revealed it will separate its manage infrastructure services unit of its Global Technology Services into a new public company.

Price Action During The Show: When the issue was being covered on the show, it was trading at the $140 area, with the premarket high standing at $142 versus Wednesday's close of $124.07. Co-host Dennis Dick was hands off on the long side: "There is no way I am chasing IBM up $15."

The author of this article said the issue needed to breach the premarket high in order for the rally to continue.

Price Action Off The Open: IBM ending up retreating during the remainder of premaket trading, opened at $130.86 and immediately found support at $130.03 and rallied. Off that low, it was only able to only reach $135.50 and has pulled back to the lows for the session.

The full discussion on the issue from today’s show can be found here:

 

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