International Business Machines Corp. (ticker: IBM) reported its 20th consecutive quarter of negative year-over-year revenue growth on Tuesday, sending IBM stock tumbling despite some big-name Wall Street supporters who remain on its side.
On Tuesday afternoon, IBM reported first-quarter earnings per share of $2.38, slightly topping consensus analyst expectations of $2.35. However, IBM’s quarterly revenue of $18.16 billion was well short of consensus estimates of $18.39 billion and represented a 3 percent decline from the same quarter a year ago. IBM also provided full-year 2017 EPS guidance of $13.80, beating consensus estimates of $13.78.
IBM CFO Martin Schroeter says the company is making all the right moves to position itself to benefit in the long term. “We’re taking time to make sure we invest in the right places and make sure we get the kind of high-value profile we’re looking for,” he says.
Deutsche Bank analyst Sherri Scribner is skeptical that IBM can right the ship in the near future.
“Bulls may continue to argue that strategic imperatives will soon lead to growth, but we continue to see a core business that is deteriorating,” she says of IBM’s segment that includes the cloud, its Watson product, analytics, security, social and mobile technologies. Scribner says an inflection point for IBM’s sales is “still years away.”
[Read: Stock Market Showdown: IBM, Microsoft Storm the Cloud.]
Morgan Stanley analyst Katy Huberty says deteriorating gross margins were the most troubling part of IBM’s quarterly report, but the stock remains a compelling long-term value for investors.
“We believe investors underestimate the transformation of IBM to a cognitive cloud platform through investments that are largely in place today,” Huberty says.
Morgan Stanley maintains an “overweight” rating and a $212 price target for IBM stock.
One of IBM’s biggest Wall Street supporters is billionaire Berkshire Hathaway ( BRK.A, BRK.B) CEO Warren Buffett.
“IBM continues to be profitable and generate significant cash flows,” Buffett said after a particularly weak quarter from IBM in 2016. “We currently do not intend to dispose of our IBM common stock and we expect that the fair value of this investment will recover and ultimately exceed our cost.”
[Read: Artificial Intelligence Stocks: 10 Companies Betting on AI.]
Berkshire currently owns 81.2 million shares of IBM representing roughly an 8.6 ownership of the company.
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International Business Machines Corp. (IBM) Is Testing Investors’ Patience originally appeared on usnews.com
