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Should You Buy IBM Stock Ahead of Earnings? Analyst Dives In


It has been years of up and downs for IBM (NYSE:IBM) stock, but in the second-quarter the computing giant showed signs of promise moving forward. IBM has begun to veer away from its previous forte and align its visions with those better suited for tech’s future. IBM refers to its new focal points as the Strategic Imperatives, or the segment involving the company’s investments in cloud, analytics, mobile, social, and security technologies.

Daniel Ives, head of technology research at GBH Insights, has recognized IBM’s hardware headwinds and commends its recent efforts to change. Ives is confident that as the firm continues to concentrate on strategic analytics and cloud initiatives, its future will only get brighter. However, the analyst also maintains that IBM has a ways to go before it can convert its bears to bulls.

With all hands on deck in Strategic Imperatives, IBM was able to reap roughly 50% of its revenues from this segment, an all-time high. As time goes on, Ives expects this number to keep climbing, especially if IBM wants to turn around its recent performance. The analyst believes that if the tech player can continue cutting costs, changing its sales force, and investing in artificial intelligence, this figure will rise and its stock value will follow. “Focus on driving big data, cloud, and analytics sales is starting to resonate with customers and helping the company slowly start to turn the corner,” emphasizes Ives. If IBM has any intention of establishing itself as a market share leader, it must uphold its efforts in Strategic Imperatives, the main factor that will both attract Wall Street and drive its stock throughout 2H18.

Q2 was the first time in a while that IBM proved it’s heading in the right direction. Although GBH is
“expecting a generally in line quarter with a better than expected performance in Strategic Imperatives,” Ives is confident that if the tech titan can keep up its current performance over the rest of the year, profit and stock numbers will finally rise. Sustaining ongoing achievement, however, will by no means be a walk in the park. IBM must become more consistent in its product execution, fully transition into this software driven generation, and compete with other top firms like Oracle, Xerox, and HP.

Flipping the page on hardware will be a challenge for IBM, but Ives predicts it will soon do so, maintaining an Attractive rating for the stock with a $180 price target. (To watch Ives’ track record, click here)

Wall Street tends to agree with the analyst’s confidence on the software giant, considering TipRanks analytics reveal IBM as a Strong Buy. Out of 8 analysts polled in the last 3 months, 6 are bullish on IBM stock while 2 remain sidelined. With a return potential of nearly 24%, the stock’s consensus target price stands at $178.14.