Should I buy IBM shares after Q4 results?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Jan 23, 2022
  • IBM will announce Q4 results this Monday
  • The consensus EPS estimate stands at $3.29
  • UBS downgraded IBM

International Business Machines Corporation (NYSE: IBM) will announce fourth-quarter earnings results this Monday, January 24, after the market closes.

IBM shares have weakened slightly above 3% since the beginning of 2022 year, and the current price stands at $129.35.

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UBS downgraded IBM

IBM will announce fourth-quarter earnings results this Monday; the consensus earnings per share estimate stands at $3.29 (+58.9% Y/Y), while the consensus revenue estimate is $15.98 billion (-21.6% Y/Y).

Over the last two years, IBM has beaten earning per share estimate every time; still, the company has beaten revenue estimates 63% of the time.

The company’s shares have weakened after IBM reported third-quarter results in October, which showed that IBM earned $2.52 a share on revenue of $17.62 billion and missed analyst estimates by $190 million.

The disappointing sales results were mainly connected with IBM’s global technology services business, but the board of directors said that expects double-digit revenue growth in IBM consulting division for the fourth quarter and software revenue growth rate to improve versus the third quarter.

IBM recently announced plans to sell off its healthcare data and analytics assets to Francisco Partners, and it is important to mention that IBM completed the spinoff of its managed technology services business, Kyndryl (NYSE: KD).

Negative information is that UBS downgraded IBM and assigned a “sell” rating after the Kyndryl spinoff, citing an “elevated valuation that leaves the shares vulnerable over the next twelve months. Analyst David Vogt lowered his price target to $124 and added:

The market is pricing in 2022 and 2023 earnings estimates that are 10% higher than my estimate, and the IBM stock has benefited from a rotation from growth to value, which creates risk.

Despite this, IMB has a strong position in the market; the company continues to pay an attractive dividend and ​improve its business for long-term growth and advantage.

The current dividend yield stands around 5%, IBM trades at less than eight times TTM EBITDA, and this company could deliver substantial shareholder value for many years to come.

Technical analysis

International Business Machines Corporation (IBM) shares weakened slightly above 3% since the beginning of the 2022 year, but if the company posts strong fourth-quarter earnings results, the share price could be above the current levels.

Data source: tradingview.com

If the price jumps above $135, it will signal to buy IBM shares, and the next target could be $140.

On the other side, if the price falls below $125 support, it would be a “sell” signal, and we have the open way to $120.

Summary

IBM will announce fourth-quarter earnings results this Monday, and if the company posts strong fourth-quarter earnings results, the share price could be above the current levels. IBM could deliver substantial shareholder value for many years to come, but UBS downgraded IBM and assigned a “sell” rating after the Kyndryl spinoff.

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