Is There Still Hope for IBM After This Sinkhole Day?
After IBM (NYSE:IBM) slipped 8 percent and closed at $19o on Friday — taking any hope for the Dow’s gain with it — investors were out looking for answers. IBM’s first earnings miss in eight years was no doubt alarming, but analysts are preaching patience with the tech giant, saying IBM’s pending layoffs and sales in the works could take the stock back over $200 and beyond.
Both Morgan Stanley analyst Katy Huberty and IBM CFO Mark Loughridge pointed to weakened yen and the early Easter in 2013 as contributing factors. Loughridge told the Wall Street Journal, “Our business in Japan is more heavily skewed to local services,” which forced the company to accept payments in weakened yen. He added, “It’s hard to imagine we weren’t affected by Easter.”
While many agree pointing the finger at the Easter Bunny is legitimate, there’s even a larger consensus that believes IBM will get back on track in order to hit its earnings projections for the year. WSJ reporters cite insider sources hinting at a major sale that could pump cash into company coffers later in 2013. In fact, the proposed deal with Lenovo could rake in billions…
Take out the holiday jinx and add billions in revenue and you have a return to form for IBM. Yet Friday’s slide brought back memories of 2000, the last time IBM plunged more than $17 in a single day of trading. As for erring in matters of earnings forecasts, IBM hasn’t had such a bad showing since 2005. Morgan Stanley’s Huberty pointed out that, along with 2002, the last three times such an event occurred were all in the year’s first quarter.
On the whole, there is little wrong with a company that diversifies on a level few tech companies can. In addition to the potential Lenovo sale, job cuts remain on the horizon for IBM, which was quick to point out signs of quality stewardship. The analysts agree. Thomson Reuters has the median stock price at $225, with 25 out of 26 analysts expecting IBM to be over $200 in short order. Word on the Street is IBM’s sinkhole day will pass like a blip on the radar screen.
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