Analyst: It's Finally Time To Buy International Business Machines Corp. (IBM)

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IBM – Dan Niles of AlphaOne Capital says after several years of weakness, IBM is finally a buy.

International Business Machines Corp. (NYSE:IBM) isn’t the first tech stock that comes to most investors’ minds as a buying opportunity, but one prominent Wall Street analyst is out this week making a bullish case for the much-beleaguered name.

Dan Niles of AlphaOne Capital writes on CNBC that a combination of overwhelmingly weak sentiment, high dividend yield, and a successful launch of the new Z14 mainframe combine to make IBM a compelling choice right now:

How risky is the stock in the event of a stock market sell-off? There are so few people left that are bullish on the stock that IBM was actually up on Wednesday when the S&P Information Technology Index declined about 3 percent and the FANG stocks declined 4 percent.

The 3.8 percent dividend yield is also very juicy with the S&P dividend yield at 1.9 percent and 10-year treasury yields at 2.4 percent. If we do finally get the long overdue correction in the second longest bull market since World War II, these defensive characteristics, much like on Wednesday, will become a lot more meaningful.

In summary, IBM may have had two left feet for the last 5 years, but we think their new dance partner, the Z14 mainframe, may get the elephant shimmying again over the next year.

Niles notes that Z14 has been rapidly adopted by the financial sector, due largely to its speedy cryptographic performance that enables it to encrypt data at a rapid pace. With the rising emphasis on security these days amid several high-profile hacks, this new product should see widespread adoption in coming quarters.

Whether that will be enough to lift IBM out of its years-long doldrums remains to be seen, however.

International Business Machines Corp. shares were trading at $155.03 per share on Wednesday morning, down $0.32 (-0.21%). Year-to-date, IBM has declined -2.98%, versus a 19.53% rise in the benchmark S&P 500 index during the same period.

IBM currently has a POWR Rating of B (Buy), and is ranked #8 of 28 stocks in the Technology – Hardware category.

IBM at a Glance

IBM Current POWR Rating™
Overall POWR Rating™
IBM Current Price $141.47 0.90%
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IBM Price Reaction

The day of this event (Dec. 6, 2017)
IBM Closing Price$145.73 0.80%
IBM Volume3,606,509
20.24% from avg
Leading up to this event
IBM 1-mo return4.02%
After this event
IBM 1-day return1.16%
IBM 3-day return0.04%
IBM 5-day return0.94%

IBM Price Chart

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