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International Business Machines Corp. (IBM) Stock Has Long-Term Oomph

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The Dow Jones Industrial Average closed at all-time highs just two days after the election, and one of the stocks leading the way was International Business Machines Corp. (NYSE: IBM ). After dipping to $151 in early trading on Wednesday, IBM stock went on to gain more than 6% through Thursday's close. I'm sure that surprised more than a few investors after IBM's earnings a little over three weeks ago.

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The company reported third-quarter results on Oct. 17, surprising the Street with better-than-expected numbers on both the top and bottom lines. Revenue of $19.23 billion bested estimates of $19 billion, and while adjusted earnings of $3.29 a share topped expectations for $3.23 a share, they were down from $3.34 a year ago.

Why IBM Stock Can Keep Up

The quarter represented the smallest earnings-per-share decline in four years, which should have been celebrated by the market. Still, management didn't hike guidance, maintaining previous forecasts for 2016 EPS estimates of $13.50, and the shares fell 2.5% that day as a result.

It's no secret that Big Blue has been underperformed under current management, and once again it seems they couldn't please Wall Street with its cloud business, even as it grows at a brisk pace. The report seemed to give the shorts their opening. In fact, I've found they feed off IBM stock every earnings report with the regularity of a crocodile at the Serengeti river migration.

But despite the ongoing frustrations with management, who have the means to jump start the cloud business in a more meaningful way, I continue to see amazing value in International Business Machines.

In fact, I called IBM stock out as a screaming buy after earnings and look where it is now. After trading between $150 and $154 for the latter part of October, the shares took off with the market in the days leading up to and following the election. They're International Business Machines is just 3% from its 52-week high.

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I also like that IBM stock is back above the 200-day moving average (the blue line), which had been acting as resistance since a pullback in September.

Going forward, one of IBM's main focal points will be the Internet of Things, which is a market that's expected to triple over the next four years.

International Business Machines is establishing itself as a leader, and it's also making a huge bet on Watson (the artificial intelligence platform) to be more than just a pretty good Jeopardy player and to become a major force in "cognitive computing" as well as the cloud space.

It all comes back to management, and I think the company now understands it needs to step on the pedal in remaking this tech giant. I believe they can do it, and while we hang on for the IBM stock ride we get to collect a nice 3.5% dividend.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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