IBM Earnings: Fiscal 2023 Finished Off With Solid Sales and Profitability

We are raising our fair value estimate for narrow-moat IBM to $139 from $126 after the firm finished out fiscal 2023 with quarterly results ahead of our revenue and profitability estimates. While we think IBM will continue to have standout parts of its portfolio that will prove to be best-of-breed in their respective areas, like transaction processing software, we continue to believe the new age of IT interoperability will continue and will drive the unraveling of the average customer's spending with IBM. With this view baked into our forecast, we view IBM’s shares as overvalued relative to our updated fair value estimate.