Wall Street Divided On Buying The IBM Dip

IBM (NYSE: IBM) dropped more than 7 percent Wednesday after the company released a disappointing Q3 earnings report.

Wall Street analysts are mixed on whether or not the sell-off is a buying opportunity for long-term investors. Here’s a sampling of what some analysts had to say about IBM.

Voices From The Street

Wells Fargo analyst Ed Caso said improvements in Services is encouraging, but deceleration in Cognitive is a potential red flag.

“The decline in Cognitive drove a deceleration in total cc growth for strategic imperatives (7% yr/yr in Q3 vs. 13% in Q2) and remains a concern, in our view,” Caso wrote.

Bank of America analyst Wamsi Mohan said Wednesday’s sell-off presents a particularly attractive entry point for investors.

“We view the stock favorably, given services improvement, and attractive div yield of 4.6%,” Mohan wrote.

Morgan Stanley analyst Katy Huberty said Q4 will be critical for IBM.

“Mgmt was surprisingly bullish on the 4Q deal pipeline but investors are likely to take a wait and see approach,” Huberty wrote.

Guggenheim analyst Robert Cihra said the primary concern for IBM investors is that revenue appears to be shifting rather than growing.

“We see the biggest negative being another downtick in Cognitive Solutions Software (revs -5%Y/Y ex-currency even worse than our -3%Y/Y estimate), which IBM is guiding to rebound Y/Y in 4QE, but we think ‘should’ be its strongest not weakest business given big acquisitions, Watson, Analytics and Security,” Cihra wrote.

Ratings And Price Targets

• Wells Fargo has a Market Perform rating and $155 target.
• Bank of America has a Buy rating and $200 target.
• Morgan Stanley has an Overweight rating and $168 target.
• Guggenheim has a Neutral rating and no target.

At time of publication, IBM shares were trading down 6.1 percent to $136.26.

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