International Business machines Corp. (IBM) Stock Analysis Breakdown

  1. IBM’s Fundamental Analysis
  2. IBM Stock Valuation Overview
  3. IBM – Technical Stock Analysis
  4. Favorable Catalysts for the IBM Stock
  5. Bottom Line Conclusion
  1. Favorable/Negative Catalysts (Continuing from previous article: Does IBM Stock Make a Good Investment?)

The rapid commoditization of servers and processing power has meant that IBM's high-end server business is facing stiff competition from low-cost x-86-based server platforms. The advent of the Cloud-computing model and virtualization has further put pressure on IBM's margins, offering server-based solutions to customers at much reduced prices.

However, Cloud Computing also offers some exciting opportunities for the company. As clients build their own private Cloud-based networks, IBM is uniquely positioned to support and manage them in their endeavors. 

When it comes to integrated software solutions, Oracle (ORCL) (IBM’s competitor) seems to have a much better suite of applications that meet upwards of 80% to 90% of their users needs without significant customization or expensive add-ons. IBM needs to re-invent itself in this area in order to stay relevant.

IBM's market dominance as a one-stop-shop for hardware, software and services is unrivalled, with none of its existing competitors able to deliver the vast array of offerings that IBM has. This unique situation gives the company a better perspective of a client's needs, putting IBM in a position to leverage cross selling and up-selling it's offering to existing and potential clients.

One major unfavorable catalyst to future growth for IBM and other large IT product and service companies however, is the global economy. If weak economic conditions continue to persist, big corporations are likely to rein in spending on large IT infrastructure projects which will put a dent in the revenues of companies offering such products and services – notably IBM.   

  1. Bottom Line Conclusion

As noted in the introduction to the “Is IBM Stock a Good Buy, Sell or Hold?” analysis, since April 19, 2013, IBM has been badly beaten up because of a poor Q1 2013 quarter, this despite the company’s excellent track record of raising and paying dividends, and having a strong share buyback program.

In our opinion, this pull back offers an excellent opportunity to establish a small position in IBM, or mildly increase an existing one. We therefore rate IBM as a MODERATE BUY.

Best of luck in your investing, and let us know if you have any questions.

MarketConsensus Stock Analysis Desk

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(By: Monty R. – MarketConsensus News Contributor)