Analyst Note| Julie Bhusal Sharma |
IBM reported fourth-quarter results that beat CapIQ earnings consensus expectations--but top line performance weighed on overall results, as the company’s revenue came behind CapIQ consensus estimates. While we forecast a return to top line growth for IBM in the upcoming fiscal year, a meager annual growth of 1% year over year is the extent we expect. IBM’s largest and worst-performing segment, global technology services is still expected to be spun off by the end of fiscal 2021. We continue to believe this spin-off will only improve IBM’s remaining business in optics--as the separation should expose IBM’s other segments’ better growth and profitability profiles. We are maintaining our fair value estimate of $125 per share for the narrow-moat name, which leaves shares fairly valued, in our view.