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International Business Machines Corporation Message Board

  • balak_joshi balak_joshi Oct 23, 2013 10:19 AM Flag

    $260 in 2014: IBM could trade again at 13X forward earnings by 2014 or $20 * 13 = 260

    $260 in 2014: IBM could trade again at 13X forward earnings next year or $20 in 2015 * 13 = 260

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    • stock market is still crazed with growth , hence , the big money is ignoring Big Blue .. part of that dynamic is
      some do not recognize growth potential in large companies ... once the "new reality " sinks in , they will be
      back for more Big Blue shares ....
      until these guys realize that the game is not only about revenues , but how a company is managed and that
      it's more pracical to swap some rev for much larger margins , then you can expect that p/e to go lower before
      it goes higher , thus keeping a lid on share price ... at some point the p/e will expand .. it will be good to own
      a bunch of Big Blue by then .. this means that we are in an excellent accumulation phase .. no big hurry though ,
      so a dollar cost average over the next 2 years will return very well ... add a little sugar , like increasing the
      div and BIg Blue is an excellent long term investment at this tme .. garce

    • I have been thinking of 20*14 = 280 for a long time.
      However, Profit / Revenue have been detached for too long. Sooner or later this needs to be resolved.. Cost cutting is a passive way to handle this issue.
      When we can see the proactive action from increasing revenue point of view?

      Sentiment: Hold

      • 1 Reply to jyabc888
      • I think 13-14x for this size of company would have to include the G of GARP in it for revenue. They gave grown earnings, but market won't pay up for zero revenue growth. It's now a value stock story, period. I thought the miss on revenue was pretty miserable, but if you look at EMC, they missed revenue by a similar percentage of sales. Growth in revenue organically is tough for their size and business model.

        So, I basically agree with you, that they do need some revenue growth. That has not been the model though. I see some of the revenue likely going the other way -- getting rid of some of the X series servers, etc. Going the opposite direction, revenue wise, on hardware.

        That said, maybe a larger than normal acquisition (though this seems out of character with their stated goals of 20 B on buy backs, 20 B on company purchases). We could speculate:

        Hardware: EMC? AMD (unlikely), something in networking (CSCO - ha! too big). Flash outfit(s)?
        Software: SAS? SAP too big, too pricey. Maybe one of the bigger analytics firms? Would fit their bent right now.
        Services: could buy bolts ons all over the industry for that. I would not even speculate, at this point. Probably smaller ones in verticals they want to develop. Smarter planet stuff, etc.

        I kinda doubt the above, I think they stay the 2015 plan course. I don't think you see any PE expansion unless they have really good alignment of P and Z cycles next year, and maybe Pure Systems takes off. They need to get their stuff together in storage too. EMC would give them that, and VMware. That'd be a big bite, but it would sure get the industries attention.


        Sentiment: Hold

    • Not just an average joe are you my son.

      THINK big...

      • 1 Reply to eye_be_m
      • Yes. IBM should think like "IBM": Innovative and big. Recent buys are too small and they add a drop in a bucket...

        Yes hardware revenue will suffer due to cloud computing / visualization. We have to assume this is true instead of hanging on it to squeeze more revenue (nothing wrong with that)..

        Buy a bigger company which can compensate the revenue loss from hardware is the definite way to go..

        Sentiment: Buy

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