IBM - Embedded Expectations Analysis - 2021 08 16
International Business Machines Corporation (IBM:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about free cash flow, margin expansion, and hybrid strategy execution.Specifically, management may lack confidence in their ability to improve free cash flow generation, execute their hybrid cloud and AI strategy, and increase net revenue retention. In addition, they may have concerns about progress of their Kyndryl spin-off, the progress of their transition to a more software-oriented business, and hiring challenges in the Global Business Services (GBS) segment. Furthermore, management may lack confidence in their ability to sustain gross margin expansion, cloud revenue growth, and Red Hat revenue growth. Moreover, they may be exaggerating the control and security features built into IBM Cloud for financial services, their capabilities in AI for business, and the strength of their Global Technology Services (GTS) incumbent positioning
International Business Machines provides integrated solutions and products that utilize data, information technology, capability in industries and business processes. The company has five segments: Cloud and Cognitive Software, which provides a range of software offerings; Global Business Services, which provides consulting, systems integration, application management and business process outsourcing services; Global Technology Services, which provides project services, managed and outsourcing services, cloud-delivered services, and technical and IT support services; Systems, which provides technology and service; and Global Financing, which provides client financing, among others.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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