With shares of International Business Machines (NYSE:IBM) trading at around $201.75, is IBM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
People who make predictions are swindlers! Well…not exactly, if the prediction is based on research and factual numbers. Some analysts actually have an impressive track record. However, even if you don’t believe that humans are capable of making accurate predictions, then maybe you at least believe that machines are capable of such a feat. If that’s the case, then you might want to consider an investment in IBM.
IBM’s Big Data & Analytics segment can help predict patterns and/or changes in customer behavior. This is highly detailed information that would take humans eons to perfect. IBM originally expected revenue of $16 billion for Big Data & Analytics by 2015. That estimate has now been raised to $20 billion. IBM’s two other big growth initiatives are cloud computing and Smarter Planet.
IBM is a highly diversified company with phenomenal management. For example, since 2010, IBM has made 35 acquisitions for approximately $12 billion. This is impressive and has helped fuel growth. What’s more impressive is that IBM divested many of its underperforming assets over the past 10 years, saving it $15 billion. Therefore, the company has a net gain through acquisitions and divestments before any potential growth seen through acquisitions, because it was willing to cut the cord on what wasn’t working. IBM’s strategy of continuously pouring money into successful segments of the business and growing through innovations and acquisitions while “getting rid of the bad” is what gives IBM that simple genius reputation.
Let’s take a look at some more important numbers prior to forming an opinion on this stock.