International Business Machine
After reporting earnings yesterday IBM’s stock price fell 10% and is down another 1% today as I write this. Mr. Market is reacting to IBM’s slight revenue miss despite earnings coming in a penny higher than analyst forecasts. Quarterly revenue was expected to come in at $17.81 billion but instead came in at $17.62 billion. However, it is also interesting to note that revenue of $17.62 billion was more than the $17.56 billion IBM produced in the year ago quarter. The company attributed the revenue weakness to its technology services business Kyndryl which the company plans to spin off into a separate company next month.
Analysts have expressed concern over this and referred to the spinoff as a potential disruption. Arvind Krishna, IBM’s chairman and chief executive attempted to soothe analyst concerns by referring to it as only a potential slight pause. Moreover, Krishna, trying to further ease analyst concerns by stating complete confidence that this whole situation should be well behind IBM by the beginning of 2022. He added that IBM should also get into a new product cycle on some of the hardware in the first half of 2022 adding that he thinks it will put it completely behind the company.
Regardless of yesterday’s news and occurrences, I continue to have confidence in IBM as an above-average income producing investment with long-term potential. I believe, as I will illustrate in the video, that the company’s dividend is well covered by cash flow, and therefore, I expect it to be safe and stable. As a result, the position is doing exactly what it was invested in for.
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Disclosure: Long IBM at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.