Growth Has Finally Dawned On IBM As It Continues To Transform

I recently took another look at International Business Machines Corp. (NYSE:IBM). Some people thinks it’s done for as after it reached a high of $215 in 2013, it has since gone down to the $150 area and now it’s back up to the $170 area. Is IBM still a valid investment?

Here’s why I believe IBM is turning a new leaf with proof of growth.

Summary

  1. IBM is transforming its business, just like its many enterprise clients who want to extract value with new technologies such as the cloud, Big Data, analytics, social, and mobile.
  2. IBM is innovating, moving towards high value products and services, as well as developing open ecosystems and forming strategic partnerships with leading companies including Apple, Facebook, Twitter, SAP, and Tencent.
  3. Other than its Hybrid Cloud, IBM’s customizable POWER microprocessor, and Watson Analytics are also showing promising growth potential.
  4. The company is undervalued and at a high yield of 3%, its shares are attractive.

Is IBM a Buy Today?
IBM has increased its dividends for 20 years in a row. It continues to return substantial value to shareholders through dividends and share buybacks. Its last dividend growth rate was an impressive 18.18%.  Most importantly, its shares are undervalued trading close to a P/E of 11.

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Disclosure: At the time of writing, I am long IBM.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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2 thoughts on “Growth Has Finally Dawned On IBM As It Continues To Transform

  1. Derek

    I was looking at that one, too. I’m not seeing any signs that this “transformation” has turned around IBM’s top-line descent. Also this cloud computing business is something of a commodity. IBM has never done well in commodity businesses.

  2. Passive Income Earner Post author

    Derek, thanks for commenting.

    I think the transformation (though at a slow pace) is happening, partnering with other big guys and shifting to high value products and services. IBM’s revenue is growing in certain areas, but as a whole, it’s still decreasing. Well, time will tell.

    Cheers,
    PIE

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