Tech Stock Pick: International Business Machine Corporation (IBM)

IBM

International Business Machines Corporation (IBM) is an American multinational tech firm operating in over 170 countries. The company rose through the ranks of tech titan companies as a supplier of mainframe computers. The company then diversified and included software and services in its offerings. For fiscal 2018, this corporation generated a top line of $79.6 billion while employing 350,600 people.

Technical Analysis of International Business Machines Corp. (IBM)

A quick look at the monthly chart of this stock shows that it may have ended its six-year correction.

In March 2013, the stock printed an all-time high of $215.90. From that point, the stock went into a downward spiral. In December 2018, it posted a lower low of $105.94. Fortunately, bulls came roaring back and took control of the stock. Now, we’re seeing an opportunity to enter at a price area where multiple supports are converging.

Technical analysis reveals that the stock has recovered its bullish tone. We have this view because IBM managed to reclaim its uptrend line in June 2019 when it closed the month above $135. A read of the monthly chart tells us that $135 is a key level for IBM.

On top of the uptrend line or diagonal support, $135 was also a previous resistance for the stock. The recovery of this level is key because it tells us that bulls have successfully converted the resistance into support. Also, the 200-month moving average (MA) is crawling close to $135. This indicator is the line in the sand of IBM’s long-term uptrend. Thus, the stock’s uptrend remains intact as long as it is trading above the 200-month MA.

Fundamental Analysis of International Business Machines Corp. (IBM)

In addition to our technical analysis, the fundamental analysis also supports our bullish view.

The company’s latest earnings report came out a few days ago. For the second quarter of 2019, IBM posted an earnings per share (EPS) of $3.17, which is higher than expert estimates of $3.07. Also, the company reported revenues of $19.2 billion for the quarter which is in line with expert estimates.

While the EPS beat sounds exciting, it pales in comparison to the acquisition of Red Hat. IBM paid $34 billion to purchase the multinational software company. The acquisition gives IBM access to Red Hat’s annual revenues of $3.4 billion.

The strategy is to buy on dips as close to $135 as possible. If bulls can keep the stock trading above this support, it will target $180.

The timeline for the target is less than a year.

Weekly IBM Chart

IBM weekly stock chart
IBM weekly stock chart

Monthly IBM Chart

IBM monthly stock chart
As of this writing, International Business Machines Corp. (IBM) is trading at $149.68.

Summary of Strategy

Buy: On dips as close to $135.
Target: $180
Stop: $128 after the breakout.

 

Disclaimer: The writer does not own shares of International Business Machines (IBM).
Featured image courtesy of Shutterstock.

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Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.