Experienced traders do know that every earnings season is an opportunity to capitalize on the stock price movements. By reporting better (or worse) than expected results, publicly traded companies can move dozens of percent in a single day!
IBM Corporation will report earnings on July 18 after market close. The upcoming report will most probably move the share price, in one direction or the other.
Don’t want to miss this trading opportunity? Read the full article and find out what to expect from IBM in the coming days. Then find the company in the ‘Stock’ section of the IQ Option trading platform.
Earnings
Earnings, often dubbed the most important factor of stock evaluation, can determine the direction of the price action once the report is revealed. Higher than expected EPS is quite likely to fuel further growth. However, there are exceptions to this rule, as well. A sharp increase in EPS didn’t help Netflix shares appreciate, as the company lost 14% of the market value after reporting lower than expected audience growth.
The consensus quarterly EPS (earnings per share) forecast for IBM is $3.03. The reported EPS for the same quarter last year was $2.97. By reporting higher than expected earnings the company can stimulate the demand for its shares, thus pushing the stock price even higher (under the condition other key metrics come though). Over the course of the last 14 quarters the company has never provided lower than expected EPS. The latter, however, did not always translate into price increase.
Strategic Positioning
Warren Buffett, an investor worth listening to, believes the company is much more than a stable cash flow. According to him, a good company can boast a well-rounded management team, a realistic long-term plan and enough resources to execute the latter. He, therefore, recommends taking a closer look at the strategic aspects of the company’s business. Buffett sold 94% of IBM shares at his disposal in Q4 2017. However, it doesn’t necessarily mean that the company will not provide short-term trading opportunities, especially when financial results are good.
IBM’s growth will most probably be driven by big data, cloud computing and business analytics (segments that demonstrate steady growth). Emerging economies play an extremely important role in the business model currently employed by International Business Machines. According to OECD, by 2030 developing countries will account for 60% of the world GDP. The share of developed countries is contracting, and an emphasis on developing countries can be of great help for the company.
Industry Prospects
Tough competition, an issue observed in all segments the company currently operates in, is a #1 threat to the long-term prosperity of IBM. Dell, Oracle, Hewlett-Packard, and NetApp compete against IBM in storage and hardware enterprise segments. Amazon Web Services (AWS) and Microsoft’s Azure don’t let the company reign supreme in the IT services business. Accenture, Hewitt Associates, Computer Sciences and FDC are among other names that make the competitive position of IBM worse than impressive.
IBM has already been forced to greatly decrease costs in order to sustain profit margins. Despite working in a number of rapidly growing segments, the company will most certainly enjoy lower returns in the upcoming years due to external pressure.
Conclusion
Rated ‘HOLD’ by Zacks, IBM can both increase and decrease in price once the earnings report hits the market. As already mentioned, positive earnings surprises (usually the most important metric to follow) didn’t help the company grow in price during the last 3 years. The company was more expensive in 2013 than it is now.
In order to trade IBM shares following the earnings report, go to the ‘Stocks’ section of the IQ Option trading platform and find IBM Corporation in the list of available companies. Click ‘BUY’ should you believe the price is about to go up following the announcement and ‘SELL’ if you believe the opposite is true an IBM is about to decrease in price.
