- Morgan Stanley analyst Erik Woodring maintains an Equal-weight rating on International Business Machines Corp (NYSE:IBM) with a price target of $143.
- The analyst leans cautiously into earnings but does not expect a significant change to IBM’s CY23 outlook next week.
- He expects IBM to report relatively in-line 1Q topline results and keep CY23 revenue (low end of MSD growth) and FCF guidance ($10.5 billion, ex financing receivables) unchanged when they report earnings next Wednesday, with MS Software and Consulting trackers pointing to 1Q growth consistent with his forecasts.
- Woodring remains cautious in the face of: 1) continued CY23 IT budget uncertainty, 2) incrementally more cautious Consulting read-throughs, and 3) IBM spending intentions from the 1Q23 CIO Survey that remain primarily negative.
- IBM needs to print a nearly-pristine 1Q and give greater confidence in the 2H23 EPS and FCF ramp to support valuation; otherwise, any minor blemishes in the quarter will likely result in post-earnings stock weakness (and lower conviction in achieving CY23 expectations), despite IBM’s relatively defensive profile.
- Heading into the print, the 5 key metrics the analyst is watching include: 1) CY23 revenue growth and deal commentary, 2) Red Hat and TPP growth, 3) Consulting revenue and the quarterly book-to-bill, 4) PTI (payment to income) margins, and 5) 1Q FCF and CY23 FCF outlook.
- Price Action: IBM shares closed lower by 0.44% at $130.46 on Tuesday.
Gold Bull Peter Schiff Labels ‘Bidenomics’ As ‘Putting Lipstick on A Pig,’ Says Fed’s Powell Has ‘Surrendered’ In War On Inflation
Powell's suggestion to start cutting rates before inflation falls to the 2% target reflects an attempt to prop up growth by creating more inflation, Schiff said.
