International Business Machines Corp. (NYSE:IBM) seems to be struggling with its ongoing transition from low-margin hardware business into the cloud computing business. Seen by the issuance of a profit forecast that fell below the Street expectations. During an interview on CNBC, Janney Capital Managing Director, Joseph Foresi, reiterated that nothing justifies buying or holding of the stock at the ongoing transition that is only filled with uncertainties.
The fact that International Business Machines Corp. (NYSE:IBM) has been pounded with negative sentiments for a very long time according to the analyst could as well position the stock as a good turnaround story. Foresi believes the stock might have clocked rock bottom in terms of negative sentiments and that things can only get better with time.
“There is no reason to be buying IBM or hold it at this point but what I would say is that there are some interesting things going on at the company. That could provide some encouraging points going forward. First, they are taking the proper steps to move the tanker, they are getting rid of the old commoditized staff and moving to the higher value opportunity,” said Mr. Foresi.
The analyst expects potential investors to stay clear of the stock for quite some time until the ongoing strategic investments start to show up in the numbers. International Business Machines Corp. (NYSE:IBM) has been shifting focus from some of its commoditized pieces of business into higher value offerings; something that has affected its ability to post positive numbers in the market.
Strategic initiatives especially in the cloud are already showing signs of picking up, having soared by 16% in the last quarter. Foresi also rubbished suggestions that International Business Machines Corp. (NYSE:IBM) should look to buy a company like FireEye Inc. (NASDAQ:FEYE) as one of the ways of accelerating growth.
“I think to muddy the water with other large acquisitions is probably not the right move; hey need to focus on the internal staff. They need to continue to move forward the strategic initiatives and then as the tanker starts to move, I think we are closer to the bottom than we’ve been before,” said Mr. Foresi.
Let Warren Buffett, David Einhorn, George Soros, and David Tepper WORK FOR YOU. If you want to beat the low cost index funds by an average of 6 percentage points per year look no further than Warren Buffett’s stock picks. That’s the margin Buffett’s stock picks outperformed the market since 2008. In this free report, Insider Monkey’s market beating research team identified 7 stocks Warren Buffett and 12 other billionaires are crazy about. CLICK HERE NOW for all the details.
