Earnings Outlook: IBM said to need ‘nearly pristine’ earnings report to protect its stock

by News Feed Editor | Apr 17, 2023 | Stock Market

For International Business Machines Corp., earnings may need to be “nearly pristine” to preserve the stock in a tough environment for companies’ tech-budget decisions. IBM
IBM,
-0.25%,
which now receives about three-quarters of its revenue from tech services, reports first-quarter earnings Wednesday after the close of markets. In a recent note, Morgan Stanley analyst Erik Woodring said he is leaning “tactically cautious” into the report because of continued uncertainty about IT budgets in 2023.

“IBM needs to print a nearly pristine [first quarter],” Woodring wrote. “Otherwise, any small blemishes in the quarter are likely to result in post-earnings stock weakness (and lower conviction in achieving [calendar 2023] expectations),” Woodring said. Woodring wrote that spending intentions from his first-quarter survey of chief information officers were “largely negative,” suggesting budgets for tech services continue to tighten. The analyst, who has an in-line rating on IBM and a $143 price target, added that he is watching for 2023 revenue growth, particularly in Red Hat, and any deal commentary. Read from January: Morgan Stanley reverses IBM upgrade after 9 months as stock outperforms broader market The most important metric, though, could be IBM’s free cash flow figures, and any change to the 2023 outlook. Even though IBM posted its biggest sales increase in nearly a decade while …

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,” Woodring wrote. “Otherwise, any small blemishes in the quarter are likely to result in post-earnings stock weakness (and lower conviction in achieving [calendar 2023] expectations),” Woodring said. Woodring wrote that spending intentions from his first-quarter survey of chief information officers were “largely negative,” suggesting budgets for tech services continue to tighten. The analyst, who has an in-line rating on IBM and a $143 price target, added that he is watching for 2023 revenue growth, particularly in Red Hat, and any deal commentary. Read from January: Morgan Stanley reverses IBM upgrade after 9 months as stock outperforms broader market The most important metric, though, could be IBM’s free cash flow figures, and any change to the 2023 outlook. Even though IBM posted its biggest sales increase in nearly a decade while …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]