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.

What do you call a technology stock that doesn't participate in rallies in that sector and is also a value stock that doesn't participate in rallies in that sector? It’s called International Business Machines IBM, which the PreMarket Prep Stock Of The Day.

Serial Underperformer: IBM made its all-time high in March 2013 at $215.90 and ended that month at $213.30. At the current price of around $139, that marks a negative return of 35%. Over that same period of time, the S&P 500 has yielded a positive return of 163%.

Recent Underperformer: After ending 2019 at $134.04, IBM bottomed in March 2020 at $90.56 and began to rebound with the index. At the price of $139, it has yielded a return of 53%. That low came in well above its March 2009 low ($83.02) and just below its April 2009 low ($95.70). Yikes.

Meanwhile, the S&P 500 index ended 2019 at 3,231 and bottomed in March 2020 at 2,192. It has yielded 89% off the March low and 28% since its year-end close of 2019.

Earnings Beats, But No Growth: Since the fourth quarter of 2015, IBM has beat the Street's EPS estimates in every quarter except for one, which an inline in the third quarter of 2020.

Revenues are a much different story. It has beaten the Street’s estimates for revenue in only 14 of the past 25 quarters. Adding to shareholder misery is that revenues peaked in the fourth quarter of 2015 at $24.11 billion and Monday’s report revealed revenue of $17.73 billion, which ranks as the second-lowest over that time period.

Has The Tide Turned? After the close on Monday, the company reported quarterly earnings of $1.77 per share, which beat the analyst consensus estimate of $1.63. The company reported quarterly sales of $17.70 billion, which beat the analyst consensus estimate of $17.34 billion.

Now with three of the last four EPS beats, IBM has beaten for revenues in three of the last four quarters.

Moving Forward: For the last six years, IBM has rallied off its initial reports in after-hours trading and then faded during the regular session and surrendering much of its earlier gains. However, that's not the case in Tuesday’s session.

In fact, it has slightly exceeded its after-hours high ($139.60), peaking at $139.77 and still hovering at the $139 level as of 2:30 p.m. EST, for a gain of $5.08 (about 4%) at $20.

Based on the monthly charts, the issue has now cleared its March 2020 high ($136.10) and its next monthly high isn't until $158.75. Of course, holding on to Tuesday’s gains over the next few session to determine if this really a breakout or just another one of all-so common fakeouts.

The full discussion on IBM from Tuesday’s show can be found here: