Good morning!
Hope everyone had a good weekend.
Should be kind of a slow semi-holiday today.
IBM/Batman - Krishna says the hybrid cloud opportunity is a $1Tn market:
"Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating ... Now is the right time to create two market-leading companies focused on what they do best."
The company will spin off the Managed Infrastructure Services unit of its Global Technology Services operation into a new public company. The tax-free deal is expected to be completed by the end of next year.
The company sees Q3 adjusted EPS of $2.58 vs. consensus of $2.58, and revenue of $17.6B vs. $17.56 consensus.
So they've raised guidance ahead of the spin-off and they're not doing the spin-off to head lower, right? Last two Qs were $1.84 and $2.18 so these guys are pretty virus-proof so $2.58 and last year's Q4 was $4.71, which would put us at $11.31 though I doubt Q4 will be as strong as last year. So $12.30 is not out of the question but the spin-off and transition could be a bit disruptive so I wouldn't go too crazy but I'm certainly comfortable with IBM at $125 for the long-haul as the same good value it was when we picked it at $110 in Nov 2018 as our Stock of the Year for 2019.
The Stock of the Year doesn't have to go up (we hit $150 in Jan 2020) but it does have to be one we are certain will make 300% with an options trade and just knowing we got a bargain was enough to be sure with IBM.
At the moment, I wouldn't make IBM the stock of the year because it COULD fall back to $100 if the market tanks.
