Technology
How the Most Negative IBM Analyst Sees It After Earnings
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International Business Machines Corp. (NYSE: IBM) continues to face problems after the company reported its earnings late Monday. The issue is a question of the quality of earnings. Despite Big Blue beating estimates, the results are still somewhat weak, looking at years past, and one key analyst is taking a very negative stance on this company going forward.
Credit Suisse reiterated an Underperform rating with a $110 price target, implying a downside of roughly 24% from the current price level.
While per-share earnings topped estimates, the company booked a $1.0 billion non-U.S. tax gain, which offset a major workforce rebalancing of $1.5 billion. Credit Suisse believes the quality of earnings was again low and the manner in which IBM has chosen to manage its business seems unsustainable.
The brokerage firm believes the secular and structural challenges facing IBM remain, and specifically it sees limited improvement in Services and Software margins. As a result, Credit Suisse adjusted its fiscal 2016 and 2017 earnings per share (EPS) estimates to $13.49 and $13.18 from $13.30 and $13.24, respectively.
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