by Ian Harvey
April 21, 2021
IBM recorded highest quarterly sales growth in more two years and beat Wall Street targets on Monday, boosted by its bets in the high-margin cloud computing business.
Meanwhile, “Stock Options Made Easy Members” Up 110% On International Business Machines Corp Options Trade!
Another trade maybe on the cards.
International Business Machines Corp. IBM shares jumped in extended trading Monday after the company reported its biggest revenue gain in eleven quarters, driven by demand for cloud services and suggesting Chief Executive Officer Arvind Krishna’s turnaround plan is starting to pay off.
IBM stock price gained 3% in premarket trading Tuesday; and settled the day trading at $138.16 adding on $5.04 – up +3.79%.
Finance chief James Kavanaugh said cloud spending by clients in retail, manufacturing and travel industries in the United States was picking up after the initial pandemic-driven slump.
Revenue of $17.7 billion rose 1% from a year earlier and topped analysts' forecasts of $17.3 billion. Total cloud revenue in the quarter jumped 21% to $6.5 billion, while sales at IBM's cloud and cognitive software unit rose nearly 4% to $5.4 billion.
The Actual Recommended Trade
** OPTION TRADE: Buy IBM MAY 21 2021 135.000 CALLS at approximately $6.70.
(actually bought for $2.76)
The Profit Explained…..
“Stock Options Made Easy members” entered a trade on IBM Monday, April 19, 2021 for $2.76.
After reporting earnings on Monday, April 19, after the market closed, the options trade peaked at $5.80 during Tuesday trading – a potential profit of 110%.
Why The Trade Recommendation On IBM?
Info tech giant International Business Machines Corp. (NYSE:IBM) will report earnings after the market closes. The consensus earnings estimate is for $1.67 per share on revenue of $17.38 billion; but the Whisper number is a bit higher at $1.73 per share.
Consensus estimates are for earnings to decline year-over-year by 9.24% with revenue decreasing by 1.09%.
For the last reported quarter, it was expected that IBM would post earnings of $1.78 per share when it actually produced earnings of $2.07, delivering a surprise of +16.29%.
Over the last four quarters, the company has beaten consensus EPS estimates four times.
performance is likely to benefit from healthy uptake of its hybrid cloud
computing platform, cognitive technologies, mobile, analytics and AI-related
Synergies from the Red Hat acquisition particularly might have contributed to the cloud segment’s revenues in the to-be-reported quarter. Markedly, Red Hat revenues in the fourth quarter of 2020 increased 19% (up 17% at constant currency) on a normalized basis. More than 2,800 clients including the likes of Barclays and Walmart are using Red Hat and IBM’s hybrid cloud platform, presently.
Further, digital transformation wave has boosted the adoption of cloud-based QRadar, and Identity and Trust services, and CloudPak for Security offerings, which is expected to have contributed to the top line growth for IBM in the about to be reported quarter. Gains from healthy adoption of IBM z15 are likely to have acted as a tailwind.
IBM has been endeavoring to improve efficacy of its quantum computing systems as well as services and blockchain offerings. In this respect, increasing IBM Q Network customer base remains a positive.
Developments.....During the first quarter, IBM acquired 7Summits for an undisclosed amount. 7Summits’ buyout will aid IBM to strengthen its portfolio of Salesforce services and foster digital transformation for Salesforce customers.
The Earnings Report.....
Total revenue rose nearly 1% to $17.73 billion in the quarter, beating analysts' average estimate of $17.35 billion, according to IBES data from Refinitiv.
Net income fell to $955 million, or $1.06 per share, in the quarter ended March 31, from $1.18 billion, or $1.31 per share, a year earlier.
Excluding items, the company earned $1.77 per share, beating market expectation of $1.63.
"Strong performance this quarter in cloud, driven by increasing client adoption of our hybrid cloud platform, and growth in software and consulting enabled us to get off to a solid start for the year," said CEO Arvind Krishna. “While we have more work to do, we are confident we can achieve full-year revenue growth and meet our adjusted free cash flow target in 2021."
IBM said it expects adjusted free cash flow for the year of between $11 billion and $12 billion.
Krishna, who assumed the top job at IBM last April, has been pursuing efforts to streamline the company’s operations with a focus on cloud-based computing.
Sales from its cloud computing services jumped 21% to $6.5 billion in the quarter. The 109-year-old firm is preparing to split itself into two public companies, with the namesake firm narrowing its focus on the so-called hybrid cloud, where it sees a $1 trillion market opportunity.
Big Blue recorded a sales decline in global technology services, its largest unit, but that was largely offset by a rise in revenue in the remaining three units, including a surprise growth in the business that hosts mainframe computers.
Mainframe saw strong traction from the financial services industry, where its banking clients shopped for more capacity as trading volumes soared during the retail trading frenzy, CFO Kavanaugh said.
"I am glad to see that strategic projects, which are IBM's bread and butter, are coming back," said Patrick Moorhead, analysts at Moor Insights & Strategy, adding that systems and global business services growth was a surprise.
"This is a good start to the year for the company who is all-in on the cloud."
Krishna said he is “confident” IBM will deliver revenue growth in the second quarter and the rest of the year. “We will exit 2021 in a stronger position than we started,” he said on a conference call after the results were released.
attributed “increasing client adoption of
our hybrid-cloud platform,” as well as growth in software and consulting, to
helping the company “get off to a solid start for the year.”
YOU NEED TO BE IN TO PROFIT!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!