Countdown to International Business Machines Corp. (IBM) 4Q:17 Earnings Print

For GBH Insights' Daniel Ives, the 4Q showcase is "all about" IBM's step forward "in the right direction;" an encouraging sign of turnaround momentum entering 2018.

As International Business Machines Corp. (NYSE:IBM) gears up to dish out its last quarterly print of 2017, one bull is setting upbeat expectations for a comeback narrative at play.

GBH Insights analyst Daniel Ives believes “a pivotal 2018” lies ahead for this tech giant, one of the initial production makers of PCs having since evolved to broad-based production as both an integrator as well as a software maker. This “turnaround” is taking “front and center” stage from where Ives is standing, cheering the recovery as “long awaited.”

Ahead of this evening’s fourth quarter print set to be released after the bell tolls, the analyst reiterates an Attractive rating on IBM stock with a price target of $180, which implies a 6% upside from current levels. (To watch Ives’ track record, click here)

Momentum is stemming from IBM’s “underlying strategic analytics and cloud strategic initiatives,” writes Ives, who notes that the giant’s Strategic Imperatives segment continues to be the key source of “fuel in IBM’s diesel engine” steamrolling into the new year. This segment marks around half of the company’s revenues while experiencing double-digit gains that help “neutralize some of the massive headwinds on its traditional mainframe hardware business.”

At last, it seems, though investor’s patience has been cracking, the winning quadruple threat combination of major cost cuts in the works, a slew of sales force modifications, noteworthy investments in artificial intelligence (AI), a shift to prioritizing the drive of big data, cloud, and analytics sales is “starting to resonate with customers.” As Ives can recognize in his survey work, it seems that “slowly,” but surely, IBM is turning the tables.

For the fourth quarter, the analyst projects an “in-line” quarter, calling for $22.0 billion in revenues and $5.17 in EPS on back of a what Ives predicts will be an outclass from the Strategic Imperatives business- a sharp “focus” for consensus. This should “drive the stock in 2018 and beyond,” wagers Ives, seeing a huge “opportunity” for IBM to make waves as a market leader in AI, big data, and predictive analytics.

From a secular perspective, with the “arms race” for AI, big data, and predictive analytics taking center stage IBM has a major window of opportunity to establish itself as one of the thought and market share leaders on this fertile market opportunity over the coming years for Rometty & Co.

In a nutshell, “The challenges and headaches remain clear for IBM heading into 2018 as the lack of consistent execution, the ability to successfully transition to a next generation software driven/Strategic Imperative model that has failed to truly materialize yet, massive competition from all angles, and legacy hardware headwinds remain the anchor on the ship. That said, this quarter its all about taking a positive step in the right direction and we believe this will also be a good signal for broader enterprise tech spending trends that we saw in 4Q, with healthy momentum overall on analytics, security, and cloud heading into 2018,” Ives surmises.

TipRanks points to an analyst majority deciding to play it cautiously optimistic when it comes to IBM’s opportunity in the market. Based on 8 analysts polled in the last 3 months, 3 rate a Buy on IBM stock while 5 maintain a Hold. The 12-month average price target stands at $171.83, marking a nearly 2% upside from where the stock is currently trading.

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