IBM's (IBM, $124.79) Largest Deal: Will Acquire Cloud Firm Red Hat (RHT, $116.68) For $34 Billion
In what could be the third largest deal in the history of U.S. technology, IBM will be acquiring open-source software company Red Hat for $34 billion. The combined entity could potentially emerge as the next behemoth in cloud computing – one of the most in-demand services today.
IBM will pay in cash to buy all shares in Red Hat at $190 each. IBM is advised by Goldman Sachs, J.P. Morgan and Lazard, while Red Hat is advised by Morgan Stanley and Guggenheim on the deal. If the deal passes regulatory and shareholder approvals, Red Hat’s operations will become a part of IBM’s Hybrid Cloud division. The deal might close in second half of next year.
Cloud technology essentially provides services such as data storage, database management, networking, access to servers access , software solutions, analytics, intelligence and more via the internet. Dropbox, Flickr, Google Drive, Netflix, Microsoft Office 365 and Yahoo Mail are examples of cloud services.
IBM-Red Hat merger is expected to help businesses/users have a smoother transition or transfer of data between different cloud platforms, and to keep users' data secure irrespective of which cloud technologies they use.
This year saw several other major acquisitions in the open source space. Microsoft acquired code-sharing platform GitHub for $7.5 billion. Salesforce bought Mulesoft (a firm that helps to collate different software applications, data and devices) for $6.5 billion. Also, Cloudera and Hortonworks announced a $5.2 billion deal to merge.
According to IBM and Red Hat, their deal would be the "most significant tech acquisition of 2018." .In recent times, IBM signed cloud contracts with Economical Insurance, ExxonMobil and Novis. What’s more, Red Hat is in partnerships with major cloud players including Amazon, Microsoft and Google - that means, following the IBM-Red Hat deal, IBM might be offering solutions to its current competitors as well.
IBM's CFO Jim Kavanaugh told investors earlier this month that its cloud business raked in $19 billion in revenue , which is more than 20% from the same time last year. Its acquisition of Red Hat (IBM's largest deal ever) could potentially bolster its cloud solutions even more.
IBM sees MACD Histogram crosses below signal line
IBM saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on March 15, 2024. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 43 instances where the indicator turned negative. In of the 43 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on April 10, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on IBM as a result. In of 83 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
IBM moved below its 50-day moving average on April 10, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for IBM crossed bearishly below the 50-day moving average on April 12, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 17 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where IBM declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for IBM entered a downward trend on April 18, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where IBM's RSI Oscillator exited the oversold zone, of 30 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where IBM advanced for three days, in of 339 cases, the price rose further within the following month. The odds of a continued upward trend are .
IBM may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of (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 (7.386) is normal, around the industry mean (19.301). P/E Ratio (22.266) is within average values for comparable stocks, (39.540). IBM's Projected Growth (PEG Ratio) (4.179) is very high in comparison to the industry average of (1.602). Dividend Yield (0.037) settles around the average of (0.024) among similar stocks. P/S Ratio (2.705) is also within normal values, averaging (51.054).
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 85, placing this stock better than average.
The Tickeron SMR rating for this company is (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 (best 1 - 100 worst), indicating steady price growth. IBM’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (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.
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General Information
a manufacturer of various computer products through the use of advanced information technology
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