Shares of International Business Machines (NYSE: IBM) plummeted sharply and suddenly last week after the tech giant released news that was concerning to investors. The company didn't formally announce its latest quarterly numbers, but did preannounce them. And the numbers were troubling enough that the stock plunged more than 25%, which is massive for a company of IBM's size.
Are the numbers really that bad and concerning? Here's why investors dumped the stock, whether it's in deep trouble, and if IBM stock may be a good contrarian buy right now.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
IBM's second-quarter results aren't due until Wednesday, but it released preliminary figures last week. One huge problem was that the company's latest numbers are a big miss for Q2, with IBM's revenue coming in at $17.2 billion versus analyst estimates of $17.86 billion, and its adjusted earnings per share of $2.93 is also lower than Wall Street's projections of $3.02.
Those are sizable misses for the business, but arguably, not enough to justify a massive sell-off. The company also said that the shortage in memory products is negatively impacting its business. The most concerning development, however, may be the news that customers are spending more on artificial intelligence (AI) servers and memory than on software and IBM's mainframe products. This paints a more concerning picture of the company's future, at least in the near term, which may be weighing the tech stock down heavily right now.
Whenever a stock falls so suddenly, the question arises of whether the market has overreacted and whether it could have opened up a great buying opportunity. Even if IBM's business is facing some headwinds in the short term, that doesn't mean it won't recover. This is, after all, a top tech company with a robust business. If the stock continues falling, it could soon hit multi-year lows.
At 17 times its estimated future earnings (based on analyst estimates), IBM's stock looks attractively valued. But analysts may also soon update their projections for the business's performance, in light of the company's comments and once the full earnings report comes out this week. There could still be trouble ahead for the stock in the near future.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
