IBM Coverage Initiated at JMP, Stock Gains
NEW YORK (TheStreet) -- International Business Machines Corp. (IBM) - Get Report stock is rising 1.44% to $138.71 in mid-morning trading on Friday after the company had coverage initiated with a "market outperform" rating and a $167 price target at JMP Securities.
IBM's diverse technology portfolio will help the company stay afloat in the struggling personal computer industry, JMP Securities said in an analysts note.
Fast growing revenue sources, such as Bluemix and Watson, will offset revenue declines in more mature businesses, including the hardware division, which accounts for less than 10% of revenue.
"We are cognizant of the challenges IBM faces and understand why investors have been frustrated with the company, as both earnings and organic revenue growth have been elusive," analysts said.
"However, we are taking the position that sentiment has swung too far to the negative, and we believe investors underappreciate," analysts added.
Separately, TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate INTL BUSINESS MACHINES CORP (IBM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 16288.9% when compared to the same quarter one year prior, rising from $18.00 million to $2,950.00 million.
- Net operating cash flow has slightly increased to $4,235.00 million or 8.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.39%.
- Despite the weak revenue results, IBM has outperformed against the industry average of 27.0%. Since the same quarter one year prior, revenues fell by 13.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IBM has underperformed the S&P 500 Index, declining 17.84% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, IBM's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
- You can view the full analysis from the report here: IBM
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.