IBM -5% after disappointing earnings, trimmed price targets

  • IBM is 5% lower today, and touching its lowest point since November, in the wake of an earnings report considered lackluster at best.
  • Revenues continued to fall, and while several analysts are reiterating their existing ratings, Societe Generale has cut the stock to Sell.
  • With SocGen on the Sell side is Jefferies, which lowered its price target to $135 from $145, implying 16.5% downside from today's already lowered price. Investors may not be fully appreciating pressures the company faces in its Software Group and Services unit, where competitive heat is rising. It didn't like the quality of the earnings given an artificially low tax rate at the company.
  • It's a "tepid report," says Goldman Sachs, which is staying Neutral but lowered its target to $170 from $175. Along with other analysts, James Schneider is a bit skeptical of IBM guidance, which suggests a big margin ramp in the second half.
  • The back-loaded guidance raises questings about EPS quality, agrees RBC's Amit Daryanani, who cut his price target to $180 from $185. But he's encouraged that free cash flow might be flat in 2017.

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