International Business Machines Corp. Shares were on track for their worst day in six months.
shares were down 7.3% at $ 1
IBM shares were the worst performing performer on the Dow Jones Industrial Average
which was down 0.1% Wednesday. The S & P 500 index
what up 0.2% and the tech-heavy Nasdaq Composite Index
what up 0.1%.
Late Wednesday, IBM reported adjusted third-quarter earnings that topped Wall Street estimates, but more glaring in the report were revenue misses into segments that are intended to wean Big Blue from its legacy mainframe business.
Of the 24 analysts that cover IBM, which split but tilted toward the negative as their price targets and two raised them, resulting in an average price target of $ 161.66, according to FactSet. With one analyst, nine analysts now have buy or overweight ratings, 12 have hold ratings, and three have sell ratings.
Third-quarter revenue declined to $ 18.76 billion from $ 19.15 billion in the year-ago period, snapping a two-quarter streak of revenue that had ended in a streak of 23 quarters where revenue had fallen.
Cognitive solutions, which includes Watson AI, which is one of IBM's poorest-performing segments for the quarter. The unit's revenue fell 6% to $ 4.1 billion from the year-ago quarter, while analysts had expected a revenue decline of 2% to $ 4.31 billion.
Technology services and cloud platform, which includes IBM Cloud, posted revenue that was flat compared with the year before at $ 8.3 billion, while analysts expected $ 8.43 billion.
Moffett Nathanson analyst Lisa Ellis, said the company has "anchor" problem when it comes to its transformation.
"IBM still has ~ 40% of revenues in areas of enterprise IT that are in long- term structural decline – areas including on-premise software, datacenter outsourcing, and hardware support, "Ellis said in a note. "While IBM may want to slow down the declines in these businesses, they may not be reversed – those segments of the industry want, over time, go away. Worse still – these businesses are highly profitable, contributing to estimated ~ 50% of IBM's profits. "
For IBM" as long as the anchor "is still large (and currently, it is still larger than the growth areas) "Ellis said."
Stifel analyst David Grossman, who has a buy rating and a $ 178 price target on IBM, in a note titled "Some Good, Some Bad, Some In-Line; Another Typical IBM Quarter, "said the company's cognitive solutions segment is the most difficult to project.
"If there's any surprise in the quarter it's the incremental deceleration of the cognitive segment," Grossman said. "Cognitive (22% of revenue, down 5% cc) includes most of IBM's software assets and while being warned of incremental weakness in 3Q following a 1% decline in 2Q, the incremental erosion was greater than anticipated."
Wedbush analyst Moshe Katri, unconvincing.
Katri said he thinks IBM wants only start generating a significant
"As is, IBM's portfolio of commoditized, legacy" tech " Katri said. "
UBS analyst John Roy, who has a buy rating and a $ 180 price rget, said "the company is talking about green shoots, but investors wanted revenue growth now."
"IBM and its analytics have begun to improve its operations; the next phase wants to be sales, "Roy said. IBM and the stock. "
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