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The Zacks Analyst Blog Highlights: IBM and Microsoft

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Zacks Equity Research
·4 min read
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For Immediate Release

Chicago, IL – April 20, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include:IBM IBM and Microsoft MSFT.

Here are highlights from Friday’s Analyst Blog:

Buy IBM Ahead of Q1 Earnings?

IBM is scheduled to report its Q1 fiscal 2020 financial results after the closing bell on Monday, April 20. The historic tech power hopes to emulate the likes of Microsoft (MSFT) as it transitions deeper into cloud computing. But the question is should investors consider buying IBM stock amid the coronavirus economic downturn?

IBM announced in January that Ginni Rometty would step down as CEO. New chief executive Arvind Krishna had already played a large role in shifting IBM’s focus to cloud, AI, and quantum computing.

Now the company hopes to expand its reach in the next-generation of technologies. This includes its $34 billion purchase of open-source software firm Red Hat, which officially closed in July 2019.

Last quarter, IBM surprised Wall Street with Q4 revenue growth, after five straight periods of declining sales. More specifically, Red Hat revenue jumped 24%, with total cloud revenue up 21%. Despite this solid expansion from vital growth units, IBM’s overall quarterly sales only climbed 0.1%.

Outlook

Our Zacks estimates call for IBM’s Q1 sales to slip 1.2% from the year-ago period to $17.97 billion. Meanwhile, its adjusted quarterly earnings are projected to fall by 24.4% to hit $1.70 a share. Peeking ahead, IBM’s adjusted fiscal 2020 EPS figure is expected to slip 4.8%, on 2.6% lower revenue.

On top of that, the historic tech giant’s consensus Q1 earnings estimate has slipped nearly 13% in the last 60 days. This is part of a broader downward earnings revisions trend that helps IBM hold a Zacks Rank #4 (Sell) right now.       

IBM stock is up over 22% since March 23 and its dividend yield rests at a strong 5.46%. However, investors can see that shares of IBM have fallen nearly 30% in the past five years. And despite IBM’s recent climb, its stock price has slipped 16% in the last 12 months.

This helps artificially inflate IBM’s dividend yield. Therefore, investors might want to wait for its guidance before they think about buying the historic giant that is still trying to navigate a big business transition.  

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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