IBM Selling Off After Q1 Print: 5 Analysts Respond

IBM Common Stock (NYSE: IBM) traded lower by 7.5 percent on Wednesday and is on pace for its worst day of trading since 2013. Investors were disappointed with IBM’s sluggish growth numbers and could be throwing in the towel on the tech stock. 

Several analysts have weighed in on the disappointing first-quarter report IBM issued Tuesday. Here’s a rundown of what they had to say:

Voices From The Street

• Bank of America Merrill Lynch analyst Wamsi Mohan said IBM's 2018 guidance is achievable, and positive margin trends are more indicative of IBM’s story than headline numbers. “In our opinion, the trends in the margins ex-restructuring tell a broader story of improving business trajectory that the headline numbers do not convey,” the analyst said. 
• Morgan Stanley analyst Katy Huberty said IBM’s business appears to be stabilizing, with improving services and software numbers. “After repositioning the portfolio, we believe IBM is in a much stronger position to capture growth in the data era, which will center on data technologies like AI/machine learning where IBM has a first mover advantage,” Huberty said.
• BMO Capital Markets analyst Keith Bachman said investors should avoid IBM stock until the company demonstrates clear margin improvements. “We believe IBM needs to demonstrate it can execute on margin expansion plans for 2H, although we think margin contraction has likely bottomed,” Bachman said. 
• Bernstein analyst Toni Sacconaghi Jr. said the messy quarter was mostly in-line with expectations despite an improving macro environment. “While revenues beat consensus expectations, they were flat year-over-year at constant currency, despite a strong set of tailwinds: a robust spending environment, a powerful mainframe cycle and relatively easy comparisons,” Sacconaghi said. 
• Stifel analyst David Grossman said IBM’s messy quarter may not have wowed the market, but the company’s fundamentals are more stable than they might appear. “IBM is going through a massive transformation in a fishbowl and we find it a bit hypocritical to reward companies that pro forma out restructuring actions and penalize others like IBM that leave them in,” the analyst said. 

Ratings And Targets

• Bank of America has a Buy rating and $200 target.
• Morgan Stanley has an Overweight rating and $198 target.
• BMO Capital Markets has a Market Perform rating and $175 target.
• Bernstein has a Market Perform rating and $150 target.
• Stifel has a Buy rating and $182 target.

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