International Business Machines Corp. (NYSE:IBM) — Big Blue has been recognized for over half a century as an industry leader for its computer hardware and software. It also offers IT services, fundamental research and related financing.
On Jan. 26, a Forbes technology contributor wrote an unconfirmed report that the company may be embarking on a massive restructuring that could be the “biggest reorganization in IBM history.” He said it could potentially affect up to 26% of IBM’s workforce, which would mean tens of thousands of workers.
S&P Capital IQ said such “decisive actions” could be constructive. Earlier in January, its analysts upgraded their opinion on IBM stock to “buy” from “hold,” and they have a 12-month target of $175.
While revenue has declined for the past two years and analysts forecast an 8% drop in sales in 2015, earnings are expected to increase. Boosted by a considerable share buyback plan, Capital IQ estimates operating earnings will rise 3% in 2015 to $16.02 per share and another 4% in 2016 to $16.60.
Technically, IBM stock double-topped in July and September at about $195, broke its 200-day moving average in October, and then opened a gap from $180.22 to $170.33. Shares began a consolidation process in November that resulted in a bullish “W” bottom and a selling climax in January where my proprietary Collins-Bollinger Reversal (CBR) indicator issued a buy signal.
Resistance is now at $164.50, forming a neckline, which, if penetrated, should carry IBM stock to my trading target of $178, 11% above current prices.
Traders should place a buy-stop order at $165 and, if executed, a sell stop at $150. Investors may purchase IBM stock at the market price as a cornerstone technology investment with the potential for substantial long-term gains.
