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Sergey Savastiouk's Avatar
published in Blogs
Jul 21, 2020

IBM (IBM, $128.89) beats Q2 earnings expectations, on strong cloud revenue

On Tuesday, International Business Machines  (IBM) reported second quarter earnings that surpassed estimates.

The cloud/information technology behemoth’s adjusted operating earnings for the three months ending in June declined -31.2% year-over-year to $2.18 per share, but exceeded the Street expectation by more than 10 cents.

Revenue for the quarter fell - 5.5% year-over-year to $18.1 billion. The figure was higher than analysts’ forecast.

Cloud revenue for the company surged +30% to $6.3 billion .

Free cash flow generation climbed +15% year-on-year.  

Citing “ the uncertainty in the environment and consistent with our direction from last quarter”, IBM did not provide near-term earnings guidance.

According to Tickeron, IBM enters an Uptrend because Momentum Indicator exceeded the 0 level on July 13, 2020

This indicator signals that IBM's price has momentum to move higher, since its current price moved above its price 14 days ago. Traders may consider buying the ticker or exploring call options. In 40 of 81 cases where IBM's Momentum Indicator exceeded 0, its price rose further within the subsequent month. The odds of a continued Uptrend are 49%.

Current price $128.89 crossed the support line at $127.84 and is trading between $129.11 support and $127.84 support lines. Throughout the month of 06/17/20 - 07/20/20, the price experienced a +2% Uptrend. During the week of 07/13/20 - 07/20/20, the stock enjoyed a +6% Uptrend growth.

Technical Analysis (Indicators)

Bullish Trend Analysis

The Moving Average Convergence Divergence (MACD) just turned positive. Considering data from situations where IBM's MACD histogram became positive, in 20 of 46 cases, the price rose further within the following month. The odds of a continued Uptrend are 43%.

The price moved above its 50-day Moving Average, which indicates a change from a Downtrend to an Uptrend. In 12 of 40 similar backtested cases where IBM's price crossed above its 50-day Moving Average, its price rose further within the subsequent month. The odds of a continued Uptrend are 30%.

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where IBM advanced for three days, in 154 of 328 cases, the price rose further within the following month. The odds of a continued Uptrend are 47%.

Bearish Trend Analysis

The Stochastic Indicator demonstrated that the ticker has stayed in the overbought zone for 3 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

The 10-day Moving Average for this ticker crossed below its 50-day Moving Average on June 24, 2020. This can be construed as a sell signal, indicating that the trend is shifting lower. In 6 of 14 cases where IBM's 10-day Moving Average crossed below its 50-day Moving Average, its price fell further within the subsequent month. The odds of a continued Downtrend are 43%.

The higher Bollinger Band was broken -- a price fall is expected as the ticker heads toward the middle band, which invites the trader to consider selling or shorting the ticker, or exploring put options. In 18 of 38 cases where IBM's price broke its higher Bollinger Band, its price dropped further during the following month. The odds of a continued Downtrend are 47%.

The Aroon Indicator entered a Downtrend today. In 64 of 158 cases where IBM Aroon's Indicator entered a Downtrend, the price fell further within the following month. The odds of a continued Downtrend are 41%.

Fundamental Analysis (Ratings)

Tickeron has a positive outlook on this ticker and predicts a further increase by more than 4.00% within the next month with a likelihood of 62%. During the last month, the daily ratio of advancing to declining volumes was 1.34 to 1.

The Tickeron Valuation Rating of 3 (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (6.80) is normal, around the industry mean (8.51). P/E Ratio (12.52) is within average values for comparable stocks, (67.96). Projected Growth (PEG Ratio) (1.65) is also within normal values, averaging (6.99). IBM's Dividend Yield (4.80) is considerably higher than the industry average of (0.32). P/S Ratio (1.30) is also within normal values, averaging (5.26).

The Tickeron SMR rating for this company is 15 (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Price Growth Rating for this company is 52 (best 1 - 100 worst), indicating fairly steady price growth. IBM’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is 75 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Profit vs. Risk Rating rating for this company is 100 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. IBM’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 74, placing this stock worse than average.

 

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