International Business Machines Corporation (NYSE: IBM) will announce first-quarter earnings results this Tuesday, April 19, after the market closes.
IBM shares have weakened almost 7% since the beginning of the 2022 year, and the current price stands at $126.56.
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Morgan Stanley upgraded IBM
IBM will announce first-quarter earnings results this Tuesday, and according to Morgan Stanley, IBM is likely to outperform in a scenario of IT hardware budget cuts.
Only 20% of revenue is directly tied to hardware and operating systems, and IBM is in a strong position to weather the issues that could impact the growth of the IT hardware market.
Morgan Stanley upgraded IBM and raised the price target on the company’s stock to $150 from $147 because it is a solid “defensive play†amid larger risks in the tech sector.
Morgan Stanley analyst Erik Woodring said that the new leadership of IBM, led by CEO Arvind Krishna continues to stimulate acquisitions, mergers, and expanding partnerships.
The result is a stronger long-term growth outlook, while the company also shows signs of improving customer sentiment and spending plans.
IBM has completed over twenty acquisitions since the beginning of 2020, roughly half of which have been in software areas, and the company continues to improve its business for long-term growth.
The equity team at Wells Fargo recently constructed a pseudo-hedge portfolio that contains 25 stocks, and Wells Fargo expects this portfolio to outperform the S&P500. IBM is included in this portfolio, which proves that Wells Fargo also sees this company positively.
It is important to mention that IBM suspended all its business in Russia due to the conflict in Ukraine, and the company continues to provide critical support to the most heavily impacted areas of Ukraine.
CEO Arvind Krishna said that IBM launched a new “Resource Finder Map†to help connect Ukrainian IBM employees and contractors to safely locate lodging, transportation, food, and supplies while fleeing the war-torn region.
Fundamentally looking, IBM is a stable company that continues to pay an attractive dividend which is high enough that it will provide downside protection.
IBM trades at less than ten times TTM EBITDA, a dividend yield of 5.18% looks safe, and with a market capitalization of $113 billion, shares of this company are fairly valued.
135 represents important resistance
IBM shares are trading below 2022 highs, but if the company posts strong first-quarter earnings results, the share price will probably be above the current levels.
If the price jumps above $135, it will signal to buy IBM shares, and the next target could be $140. On the other side, if the price falls below $120 support, it would be a “sell†signal, and we have the open way to $115.
Summary
IBM will announce first-quarter earnings results this Tuesday, and Morgan Stanley raised the price target on the company’s stock to $150 from $147. IBM is a stable company that continues to pay an attractive dividend, and shares of this company represent an opportunity for long-term investors.
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