Is it too late to sell IBM as shares slump on mixed Q3 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 21, 2021
  • IBM shares on Thursday plunged nearly 8% after announcing its most recent quarterly results.
  • The company reported its fiscal Q3 results matching analyst expectations on earnings.
  • However, revenue for the quarter fell short of estimates after registering a marginal Y/Y growth of 0.3%

On Thursday, IBM Corp (NYSE:IBM) shares plummeted nearly 8% after announcing its most recent quarterly results. The company reported its fiscal third-quarter results Wednesday after markets closed, matching earnings expectations. However, its revenue for the period came short of the consensus Street estimate.

IBM posted FQ3 non-GAAP earnings per share of $2.52, in line with expectations, while its GAAP EPS of $1.25 came short of the consensus Street estimate of $1.90. On the other hand, revenue for the quarter grew marginally by 0.3% from the same quarter a year ago to $17.62 billion, $190 million below the average for analyst expectations.

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The company attributed the revenue miss to a disappointing performance from the global technology services unit, whose sales declined by 5% from a year ago to $6.15 billion. IBM plans to spin-off the init next month.

Is it time to buy IBM shares?

From an investment perspective, IBM shares trade at a reasonable P/E ratio of 24.83 and a compelling forward P/E ratio of 10.53, making it an attractive option for value investors.

Moreover, with analysts expecting its earnings per share to grow at an average annual rate of 16.57% over the next five years as compared to a decline of 14.4% in the previous five, the stock could also gain the attention of growth investors.

In addition, IBM’s exciting forward dividend yield of about 5% could attract dividend investors.

Source – TradingView

Technically, IBM shares seem to have recently plummeted to break out of a sideways channel formation. As a result, the stock price has moved closer to the oversold conditions of the 14-day RSI, creating an opportunity for a rebound.

Therefore, investors could target potential rebound profits at about $136.51, or higher at $140.50, while $128.08 and $123.64 are crucial support zones.

Buy the pullback?

In summary, with IBM shares plunging nearly 8% on Thursday, the stock has moved closer to oversold conditions, thus creating an opportunity for a rebound. Moreover, the company offers exciting growth at compelling valuation multiples whilst paying dividends at an attractive yield.

Therefore, it could be time to buy the stock following Thursday’s sharp decline.

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