The article was written by Motek Moyen ResearchSeeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.
Summary:
The debt load of International Business Machines is worrisome. IBM’s annual sales has been declining since 2011. It will be hard to pare down a total debt of $69.45 billion.
IBM had to issue $20 billion in new debt (bond) last year to fund its $34 billion acquisition of Red Hat. This is why IBM’s long-term debt is now more than $52.4 billion.
The debt-laden status of IBM plus its lingering inability to reverse the decline in its annual revenue is why its stock is undervalued and under-appreciated.
Using debt to grow its cloud business is justified. However, Red Hat is not yet helping cloud revenue grow fast enough to mitigate the decline in IBM’s legacy enterprise business.
We can only pray that this pandemic will encourage more companies to subscribe to IBM’s cloud computing solutions.
IBM revenue hasn't grown for the last 10 quarters; this Q3, the company experienced its worst earnings miss in recent history, and consequently, dropped its long-anticipated 2015 growth plan.
Currently, IBM faces criticism: specifically, revenue stagnancy, poor international growth, inaccurate performance estimates, late transition to modern sectors, and stock buyback dependency have all been deemed problematic.
Nevertheless, IBM still has strengths; analysts and investors feel its past rebounds, legendary current status, strong leadership, novel-sector growth, cutting-edge research, and recent partnerships make it worthwhile despite the drop.
I Know First's algorithm predicts a bullish forecast for IBM in the 1-month and 3-month time frames.
Company Profile: International Business Machines Corporation
"I don't think there's any company that I can think of, big company, that's done a better job of laying out where they're going to go, and then having gone there". - Warren Buffett
International Business Machines Corporation (NYSE:IBM) - more commonly known as IBM, and frequently nicknamed "Big Blue" in reference to its affinity for predominantly blue logo, packaging, and product designs - is an American multinational specializing in computer hardware and software, as well as computer and technology services. Incorporated in New York in 1911, IBM has historically established itself as, in the very least, a significantly successful player where technology is concerned: it has been called a "legendary" company, receiving routine praise for its sound balance sheet, long track record of successful growth, huge contribution to employment numbers (IBM had around 431,212 employees worldwide as of 2013, and is pivotal to employment in certain regions), and - particularly in recent decades - its adaptability to changing technological eras.
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