Computer giant and growing software presence IBM (NYSE:IBM) surged ahead nearly 4% in premarket trading after releasing its latest earnings report. That momentum carried into this morning's trading session as well. The company offered beats on both top-and bottom-line estimates, and some of the strongest growth seen in years. Despite these gains, the larger analyst community is urging caution on investors getting further involved with the computer giant.
IBM Stock Surges Ahead With Earnings Report
IBM's earnings report featured multiple wins, including in earnings, where the company posted adjusted revenue of $2.33 per share. That compares nicely to the $2.29 per share expected by a Refinitiv consensus.
Revenue proved to be the biggest bright spot for IBM, as the company posted $18.75 billion in revenue for the quarter against an expected $18.29. This figure represented a 3.4% gain over this time last year, reports noted, which represented the fastest growth the company had seen in the last three years. The previous quarter's revenue growth was just 0.9%, and IBM even offered some positive guidance on the full-year figures. IBM continues to expect revenue growth for the full year and reiterated that point in a statement issued by the company.
IBM posted gains from several of its market segments, including its Global Technology Services segment, which by itself posted around a third of the company's revenue at $6.34 billion. FactSet analysts were looking for that sector to bring in $6.23 billion, and the actual number was a slight improvement over the same time last year. The Cloud & Cognitive Software segment, meanwhile, turned in $6.1 billion in revenue itself, which was not only up 6% against this time last year, but also beat FactSet's consensus of $5.93 billion.
Arvind Krishna, IBM's CEO, noted that overall business spending was on the rise as several sectors of the economy reopened. This took several markets and industries back up with it, and spending throughout North America and several certain industries was helping to fuel IBM's upward track.
IBM has been in the midst of a multi-year transformative effort as it moves away from hardware toward the growth of an “open hybrid cloud platform.” IBM believes, at last report, this represents a trillion-dollar market opportunity as IBM looks to provide both public and private cloud operations. The use of both private and public clouds simultaneously means extra network security for end-users. Given that cloud-based systems now account for around 38% of IBM's total revenue, the transformation appears to be working.
What Are Financial Analysts Saying About IBM Stock Today?
Despite the substantial gains seen this quarter, some of which proved to be short-term record-breakers, financial analysts are still urging caution on buying IBM. Our latest research finds IBM stock today to be a consensus-rated “hold”, a rating that's been the case for over two years now.
A year ago, the company had six “buy” ratings and 12 “hold” ratings to its credit. Six months ago, that shifted to six “buy” and 10 “hold.” Today, however, large numbers of analysts have departed altogether, as we stand at three “buy” and six “hold” ratings. The ratio of buy to hold remains the same as it did this time last year, interestingly, despite the losses in overall numbers of analysts covering the firm.
The IBM stock price target, meanwhile, is in a fairly narrow range. The current average target is $150.89, with a high of $165 and a low of $130. With IBM seen trading around $144 today, there's still upside potential to be had as the share price approaches the average target.
Recent activity for IBM has been universally positive. Just in July, four analysts raised their price targets on IBM, including Citigroup, Morgan Stanley, and Societe Generale, which all upgraded earlier today. BMO Capital Markets, meanwhile, upgraded its price target from $150 to $155 per share late last week.
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