Thursday, March 8, 2018

IBM: Long-Term Model

Anybody following my research knows that IBM (IBM) has been an attractive stock to own below $150 as the market missed the turnaround story and shift into new technologies like blockchain. The company issued a long-term model today at an Investor Briefing that should help the stock gain from here at $155.

IBM outlined a plan for high single-digit EPS growth. The stock trades at about 11x EPS estimates of $14 for 2018.
If one looks at 7% growth, IBM would add about $1 to EPS each year. The 2020 target would be $16 per share. A 14 P/E multiple would place the stock at $224.

In the meantime, the tech giant offers a 3.8% dividend yield and the downside protection of stock buybacks. A big question exists whether IBM can hit these targets. The analyst community doesn't think so with a 2019 EPS target of $14.19 as revenue growth is still non-existent, but finally positive.

IBM remains a core holding for a conservative portfolio looking for net payout yields and a potential catalyst for the stock this year.

Disclosure: Long IBM. Please review the disclaimer page for more details. 

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