IBM -5.7% premarket after Q1 gross margin fell short of the company’s efforts to stabilize its profitability, although it did "improve materially” over Q4 as IBM works to bring margins level with last year’s results, says Morgan Stanley's Katy Huberty.
The analyst also notes "disappointing systems revenue driven by a storage miss," which fell 15% Y/Y in the quarter.
But Huberty expects further margin improvement in Q2 and sees H2 estimates as more achievable, helped by an expected $600M in gross cost savings and a stronger than expected Q2 EPS forecast.
The firm maintains its Overweight rating and $198 price target for IBM shares.
Source: Bloomberg First Word
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