IBM's stock has declined around 5% since late August, dropping from approximately $239 to $220.51 as of October 10. Notably, this drop occurred without any earnings report being released during the period.
The company's Q3 results, scheduled for October 21, are expected to serve as the next key catalyst. Despite a pullback and ongoing delays in mainframe and software deals, IBM remains a Buy according to the analysis.
IBM aims to close most of these delayed deals by the end of the year, with at least half needing to be finalized by Q3 to support its guidance. The company is maintaining its target of a 100 basis points operating margin expansion, relying on productivity gains even as revenue growth slows.
The acquisition of Confluent is weighing on margins, while the free cash flow guidance of $10.9 billion for the second half of the year is considered ambitious. However, the dividend appears secure even if these targets are not met.