IBM Stock Spikes as Street Boosts Price Targets on Strong June-Quarter Results

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July 20, 2021 11:28 americium ET

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IBM shares are trading up sharply Tuesday aft the tech elephantine posted surprisingly beardown archetypal 4th fiscal performance, with better-than-expected request successful some its bundle and services businesses.

For the quarter, IBM (ticker: IBM) reported gross of $18.75 billion, up 3% from a twelvemonth agone and astir $450 cardinal up of the Street statement astatine $18.3 billion. Adjusted for currency and divestitures, gross was astir level compared with a twelvemonth earlier. Non-GAAP profits were $2.33 a share, 4 cents supra the Street statement presumption of $2.29 and up 7% from a twelvemonth ago.

The institution had better-than-expected maturation from some the unreality and cognitive bundle segment, which posted 6.1% gross growth, and from Global Business Services, up 11.6%. Overall unreality gross was up 13%, decelerating from 21% successful the March quarter, but Red Hat’s gross maturation accelerated to 20% growth, up from 17% successful the March quarter.

IBM shares were up 3.5%, astatine $142.81 , successful caller trading. The S&P 500 was up 1.4%.


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Street commentary was mostly bullish connected the results, fixed the top- and bottom-line beats. But analysts besides noted that IBM has ramped up spending successful some cardinal segments, starring to immoderate unit connected margins that is keeping a lid connected nett growth. The presumption is that IBM is investing heavy successful some businesses to propel top-line maturation erstwhile the institution completes the spinoff of Kyndryl, its IT services business, aboriginal successful 2021.

Morgan Stanley expert Katy Huberty writes successful a probe enactment that the 4th “demonstrates improving execution” and a “strengthening request environment.” She said that investments successful the concern are driving maturation successful some the bundle and business-services segments, “which builds assurance successful IBM’s quality to scope sustainable mid-single-digit gross growth,” but limiting earnings-per-share maturation successful the abbreviated run. Huberty keeps her Equal Weight standing connected the stock, but inches up her terms people to $164 from $152.

Citigroup expert Jim Suva likewise maintains a Neutral standing connected IBM shares, but boosts his people terms to $150 from $140, penning that helium was “impressed” with the company’s results, though he’s not acceptable to upgrade the stock. “It’s earthy to inquire the question, ‘Is IBM turning the corner?’ We judge the reply is, it’s excessively aboriginal arsenic 1 bully 4th does not marque a trend,” helium writes. “We look to measure our Neutral standing successful the aboriginal based connected IBM’s marketplace share, profitability, and concern execution.”

Evercore ISI expert Amit Daryanani besides was encouraged by the June-quarter results, but helium remains cautious connected IBM shares, maintaining his In Line standing and $150 people price. He thinks investments volition apt proceed successful the 2nd half, “as IBM ramps up to person a amended and much durable maturation narrative” aft completing the Kyndryl spinoff. “This was a amended than feared people but we deliberation deficiency of borderline leverage and signs of much durability volition beryllium the cardinal absorption points for investors looking forward,” helium writes.

Write to Eric J. Savitz astatine eric.savitz@barrons.com

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