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International Business Machines Corp IBM Stock Quote

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Morningstar‘s Stock Analysis IBM

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Is it the right time to buy or sell?

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New Mainframe Cycle and Seasonally Strong Quarter Team for IBM's Q2 2022 Beat; Shares Fairly Valued

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

IBM’s second quarter beat FactSet consensus for the top and bottom lines despite currency and inflationary headwinds, especially for IBM's consulting business. As a reminder, IBM's second quarter is seasonally a strong one, and this was combined with the launch of a new mainframe cycle, with the z16, a combination that IBM hasn't benefited from in 20 years. The combination helped blitz headwinds, but we caution investors that this was more happenstance than an element of long-term beneficial change. And, while the revenue outlook was reconfirmed for the year, management tapered free cash flow estimates due to headwinds from currency and Russia, bringing shares down approximately 4% upon results to near $132 per share. We are maintaining our fair value estimate of $126 per share for the narrow-moat IT services provider, which leaves the company fairly valued.

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Key Statistics IBM

Company Profile IBM

Business Description

IBM looks to be a part of every aspect of an enterprise’s IT needs. The company primarily sells software, IT services, consulting, and hardware. IBM operates in 175 countries and employs approximately 350,000 people. The company has a robust roster of 80,000 business partners to service 5,200 clients--which includes 95% of all Fortune 500. While IBM is a B2B company, IBM’s outward impact is substantial. For example, IBM manages 90% of all credit card transactions globally and is responsible for 50% of all wireless connections in the world.

One New Orchard Road
Armonk, NY, 10504
T +1 914 499-1900
Industry Information Technology Services
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Stock Type High Yield
Employees 307,600

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