Jim Cramer Says Start Buying IBM Stock Here
IBM reported adjusted earnings per share of $1.84, down 18% from the prior year, but beating consensus forecasts by 4 cents. However, revenue came in at a miss with the company reporting group revenues of $17.57 billion, missing estimates of $17.62 billion.
IBM also withdrew its full-year 2020 guidance, saying it will “reassess this position” at the end of the second quarter.
Like almost every public and privately traded company, IBM said the coronavirus is negatively impacting its business, primarily in software sales. CFO James Kavanaugh said software transactions “stalled nearly overnight.”
Adding color, newly minted CEO Arvind Krishna said, “In the last few weeks, we faced a shift in client priorities towards the preservation of capital. This impacted software disproportionately (while) other parts of our business maintained modest momentum.”
IBM’s transaction processing software business, which saw revenue drop 16% annually, TheStreet’s Eric Jhonsa reported.
The bright side? Kavanaugh noted that IBM’s top line is somewhat protected at least for the near-term as 60% of its revenue comes from recurring services.
Krishna also expressed optimism for a future where remote work and automation become more prevalent. "This gives me immense confidence in our future," Krishna said.
As of the opening bell, IBM stock was down around 4% to $115.55, partially reflecting a wider market selloff Tuesday.
So how should investors approach IBM stock after a less than pristine earnings picture?