Here's What Wall Street Is Saying About IBM Ahead Of Earnings
IBM (IBM) is scheduled to report results of its fiscal first quarter after the market close on April 19, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. GUIDANCE: Along with its last report, IBM CEO Arvind Krishna said he is confident in achieving mid-single digit revenue growth in 2022, as well as "strong" free cash flow for the year. During the company's earnings call, IBM said it expects free cash flow for FY22 to fall in the range of $10B-$10.5B and that it sees strong market demand for automation, though currency will remain a headwind.
2. MORGAN STANLEY: Last week, Morgan Stanley analyst Erik Woodring upgraded IBM to Overweight from Equal Weight with a price target of $150, up from $147, as he assumed coverage of the stock. Amid growing macro risks he views IBM as a "defensive play" given its negative correlation to PMIs and historical late cycle outperformance, Woodring tells investors. Though he calls his upgrade "a relative call," Woodring also noted that he sees signs of improving customer sentiment and expects an in-line Q1 report from IBM.
3. BMO: In addition, BMO Capital analyst last week lowered the firm's price target on IBM to $148 from $155 and keeps a Market Perform rating on the shares. The analyst states that he is intrigued with the stock's valuation, particularly given the backdrop of rising rates, but also notes that he is "not yet comfortable or convinced" that the company can meet mid-single digits Software growth targets, without 2 to 3 points of M&A. Bachman adds that while he expects Red Hat to maintain a mid-teens type of growth, he has less confidence in the balance of IBM's portfolio.
4. M&A: In early February, IBM said it acquired Sentaca, a telco consulting services and solutions provider. The company said that the deal would accelerate IBM's hybrid cloud consulting business, adding critical skills to help communications service providers and media giants modernize on multiple cloud platforms, innovate, and transform their businesses. Financial details were not disclosed.
Later that month, IBM acquired Neudesic, a U.S. cloud services consultancy specializing primarily in the Microsoft (MSFT) Azure platform, along with bringing skills in multicloud. "This acquisition will significantly expand IBM's portfolio of hybrid multicloud services and further advance the company's hybrid cloud and AI strategy. IBM continues to invest in its hybrid cloud and AI strategy, expanding its cloud services technology, skills and capabilities to meet the growing demand of clients' hybrid cloud needs. Including Neudesic, IBM has acquired more than 20 companies -- 12 in IBM Consulting alone -- since Arvind Krishna became CEO in April 2020," the company stated. Terms of this deal were also not disclosed.
Disclosure: None