IBM's Q4: Thesis Remains Viable

Posted Jan 18th 2011 6:00PM by Steven Mallas
Filed under: Earnings Reports, International Business Machines (IBM), Technology

International Business Machines Corp. (IBM) issued its Q4 report after the bell today. At the time of this writing, shares were up 2.4% to $154.25 on the news in the extended-hours session. So, is IBM a buy at this point? After all, that quote means that the stock has now gone beyond the new 52-week high of $151.47 that was set earlier in the intraday session.

You know, buying high can be scary and ill-advised. Still, I like IBM's prospects. According to the Associated Press, earnings of $4.24 per share went beyond the overall prediction by sixteen pennies. Net sales also impressed.

Looking at the press release, I see more good news. Gross margin went up by 0.8 points during the quarter. Free cash flow jumped $1.5 billion to $8.7 billion. Shareholders should be more than satisfied.

There obviously may be some profit-taking now that the stock has reached new heights, but I consider IBM an idea worthy of consideration, even with the technical risk that I alluded to earlier (I briefly discussed this concern in my preview piece).

I would keep IBM on a watch list and either wait for a dip or, if you must buy now, initiate a position with the intent of adding to it if it becomes necessary to improve the cost basis.

The quarter was strong. The chart is attractive. The momentum seems to be there. Check IBM out.

Disclosure: I don't own any company mentioned; positions can change without notice.