International Business Machines Corp.: A financial model reset? Too soon to confirm but the stock should be in a holding pattern

研报英文原文证据摘录

International Business Machines Corp.: A financial model reset? Too soon to confirm but the stock should be in a holding pattern

series fell 42% YoY as the comp was tough YoY (+67%). Infra now expected to

grow LSD for the year vs prior down LSD as demand for server/storage,

consistent with our industry checks offsets pressure in IBM Z in H2:26.

Tweak EPS estimates

We make minor changes to our CY26 and CY27 EPS estimates following estimate

changes last week. We adjust CY26 and CY27 EPS to $12.12 and $12.70 from $11.98

and $12.65 respectively.

Valuation: No change to our $236 price target

Our $236 price target or ~18x a 50/50 weighting of our CY27/CY28 EPS est ($13.19) is

unchanged. At 18x, IBM would be trading at a ~14% discount to the S&P 500 reflecting

a long-term 3%-4% organic growth outlook.

Shifting capex priorities should be a CY26 and CY27 revenue headwind

The negative revision to IBM's June quarter results was a result of shifting customer

capex priorities in part due to higher component costs including memory. Given our

expectations that memory prices should continue to increase materially into CY27, we

expect sustained pressure across IBM Z and to a lesser degree certain software assets.

Therefore, we expect investors to reset CY26 and CY27 revenue and EPS estimates

lower, effectively shifting the financial outlook out a year. For example, prior to the

negative prerelease (link), consensus expected CY26 cc revenue growth of 4.5%,

dipping to 3.2% in CY27 before increasing to 4.9% in CY28. Prior to the earnings

report and post the negative prerelease, cc revenue growth expectations for CY26 and

CY27 declined to 3.5% and 2.9% respectively while the CY28 cc revenue consensus

ticked higher to 5.1%, likely reflecting an easy CY27 comp.