Everyoneisacritic

IBM Is Trading Well Below Its Intrinsic Value

While I tend to agree with you that most forward looking analysis (like DCF's) are flawed because of our proven lack of forecasting ability, I have to take issue with your comment. Instead of dismissing it out of hand, why don't you use it to analyze what is baked in to today's price? Then, if you really think that IBM is going to see an x% decline in revenues indefinitely (when 50% of their revs are recurring) and an x% decline in margins you can make an assessment on today's price and IBM's intrinsic value.

I think too often in this environment we are just simply saying 'things are going to get worse'. Probably true, but how bad does it have to be to justify these prices? It seems like traditional measures of valuation have been forgotten. Fear dominates, like greed did in the Internet bubble. Long-term I think we will look back on this period as an excellent opportunity. Short-term, unfortunately, we are at the mercy of irrational behaviour motivated by sentiment alone. A stock's price is a lot more volatile than its fundamentals.

On Oct 22 12:39 PM bobbobwhite wrote:

> This article is totally wrong in using past or even present revenue
> and profit estimates in valuing IBM as the estimate is distorted
> way upward. Nearly all stock rev/eps estimates will see some lowering
> due to negative fallout from the recent Wall street debacle, and
> some will be drastically cut and others will fail entirely.
>
> Any thoughtful valuation must now wait for new rev/eps estimates
> based on the depressed economy expected to be the case for the rest
> of 2008 and 2009, and it will be killer bad for many and worse for
> others.