Is IBM Poised to Head Higher?

With shares of International Business Machines (NYSE:IBM) trading around $187, 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:

T = Trends for a Stock’s Movement

IBM is an information technology company. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Technology products and services are in high demand worldwide as consumers want to be up-to-speed, and companies always need the latest and greatest to stay ahead of the competition. Cloud computing has been hot in recent times, which has not been good news for IBM. Should the company want to hold on to its market share, it needs to make moves quickly, and provide the technology products and services that worldwide consumers and companies demand.

IBM on Thursday announced plans to create a new unit dedicated to Watson, the supercomputer that beat human contestants on Jeopardy! in 2011. Called the IBM Watson Group, the new division will promote commercial use of Watson’s software, which mines large volumes of data to answer questions and improves by learning. It will be based in New York City. IBM, which reported revenue last quarter of $23.7 billion, plans to invest more than $1 billion into the new division, primarily for research and development. The investment also includes about $100 million for venture investments into start-ups and businesses building apps powered by Watson’s technology. IBM has been encouraging outside developers to use Watson in their own apps; in November, the company launched the Watson Developers Cloud, which gives developers access to Watson’s application programming interface, software kits and educational materials.