Shares of International Business Machines Corp. (NASDAQ:IBM) are falling Thursday after the company shared earnings results for the third quarter. In response, several firms lowered their price targets on the stock.
- IBM is encountering selling pressure. See if it is worth your attention here.
What To Know: IBM exceeded guidance for earnings per share, free cash flow and revenue, which increased about 9% year-over-year and saw gains across all segments.
The company also reported strong gains in net income, which was tallied as a loss this time last year. Cash flow from operations totaled $3.1 billion in the quarter and free cash flow came in at $2.4 billion.
Given the strength of IBM’s results, the company guided for constant currency revenue growth of more than 5% for the full year. IBM also raised its full-year free cash flow outlook to approximately $14 billion from around $13.5 billion.
Despite the optimistic sentiment, Stifel and RBC Capital lowered their price targets, with the latter moving from $315 to $300. BMO Capital raised its target to $305, but maintained a Market Perform rating. Analysts consensus has a Hold rating on the stock.
During the earnings call, IBM CEO Arvind Krishna said the company is focused on cloud services and AI. The IBM CEO noted that the company is exceeding its goal of using AI to reduce expenses. He said IBM will save $4.5 billion by the end of this year, well beyond the goal of $2 billion that was set in 2023.
Looking forward, the company’s CFO Jim Kavanaugh said he expects software revenue growth to approach double digits this year. However, Kavanaugh did caution that growth in Red Hat is expected to come in at the low end of expectations.
IBM Analysis: IBM is trading approximately 4% above its 50-day moving average of $263.79 and about 7% above its 200-day moving average of $257.52. The relative strength index (RSI) stands at 62.23, suggesting a neutral position that does not indicate immediate overbought or oversold conditions. This technical setup may imply that while the stock has seen a correction, it remains in a generally healthy trend.
Support for IBM is identified at $272.54, which could serve as a critical level to watch in the event of further declines. Should the stock breach this level, it may test the 50-day moving average as an additional support point. On the upside, resistance is noted at $285.45, which aligns closely with the previous close of $287.51, indicating a potential area of selling pressure.
IBM Price Action: Shares of IBM were down 2.58% at $280.38 at the time of publication on Thursday, according to Benzinga Pro. The stock is trading within its 52-week range of $203.51 to $301.04.
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