The analyst adds that he holds “a constructive
view on IBM’s fundamentals despite an
uncertain macro backdrop.”
Sounds like this analyst is overpaid. . .
https://www.barrons.com/articles/apple-stock-ibm-earnings-51673974072
By: Eric J. Savitz
Jan. 17, 2023 11:48 am ET
With tech earnings season now dead ahead, investors are tweaking their portfolios ahead of what could be a tumultuous period for the group, with the Street anticipating generally weak guidance for 2023 amid ongoing concerns about a potential recession. But it’s not going to be a complete wipeout. Evercore ISI analyst Amit Daryanani, for one, thinks investors should stock up on both Apple AAPL –0.37% and International Business Machines shares ahead of their upcoming reports.
Daryanani on Monday added both Apple (ticker: AAPL) and IBM IBM –3.21% (IBM) to Evercore’s “Tactical Outperform List,” a roster of names expected to be strong near-term performers.
On Apple, Daryanani notes that the stock has underperformed the S&P 500 SPX –1.46% by 16 percentage points since the company’s last earnings report in October, and asserts that the stock looks like a “compelling buying opportunity.” Apple stock has come under pressure in recent weeks as analysts ratcheted down sales expectations for the iPhone 14 Pro and Pro Max, due to recent Covid-related production issues in China.
Daryanani sees some risk that December-quarter iPhone sales could still miss estimates, but adds that given the stock’s recent sell-off, “a miss shouldn’t have a material impact on shares” as long as Apple’s guidance suggests the lost sales will be recovered in coming quarters. In particular, he predicts March quarter guidance will be about 5% ahead of current Street consensus estimates, as iPhone sales begin to rebound. He maintains his Outperform rating on Apple stock with a $190 target price.
As for IBM, Daryanani writes that the company is “well-positioned” to report December quarter results ahead of Street estimates, while also providing 2023 guidance ahead of current estimates, thanks in part to a more favorable currency situation for a company that last year was hit hard by the strong dollar. He thinks IBM’s fourth-quarter revenue could get a boost of 100 to 180 basis points from a more favorable currency situation than had been expected, with an even bigger tailwind from currency for the full year.
The analyst adds that he holds “a constructive view on IBM’s fundamentals despite an uncertain macro backdrop.” He notes that more than half of the company’s annual revenue is recurring, its workloads are “mission critical in nature,” and IBM has a predominantly large enterprise customer base that he thinks will be more resilient than smaller companies in a downturn.
Daryanani keeps his In Line rating on IBM stock, but raised his target price to $150 from $135 to reflect “potential upside” when the company reports earnings next week.
Apple stock is 1% higher at $136.07, while IBM stock is up 0.5% to $146.68.