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Yahoo
2 days ago
- Business
- Yahoo
These Analysts Want You to Buy the Dip in IBM Stock
International Business Machines (IBM) stock tumbled more than 7% on Thursday, July 24 following second-quarter earnings results that beat Wall Street expectations, prompting several analysts to view the decline as an overreaction and a compelling buying opportunity despite investor concerns about the consulting business and macro uncertainties. In Q2 2025, IBM reported revenue of $17 billion, above consensus estimates of $16.6 billion, while adjusted earnings per share stood at $2.80, above estimates of $2.64. However, software sales of $7.39 billion fell short of the $7.43 billion consensus, likely contributing to the stock's weakness despite the overall revenue beat. More News from Barchart Tesla Just Signed a Chip Supply Deal with Samsung. What Does That Mean for TSLA Stock? Dear Microsoft Stock Fans, Mark Your Calendars for Aug. 1 Is Lucid Motors Stock a Buy, Sell, or Hold for July 2025? Tired of missing midday reversals? The FREE Barchart Brief newsletter keeps you in the know. Sign up now! Analysts Remain Bullish on IBM Stock Melius Research analysts, led by Ben Reitzes, called the stock drop too severe, given IBM's positioning in what they see as a major mainframe cycle. The analysts highlighted 'momentum' for IBM's new z17 mainframe system and noted benefits from currency tailwinds, as well as prospects for transaction processing to recover. 'We are buyers on weakness since IBM is still entering a big mainframe cycle, software is set to accelerate from here with help from Red Hat and Automation,' the Melius team said, adding they see earnings upside in the coming years. The analysts view Red Hat as 'the business that is most important to IBM's long-term multiple,' citing the hybrid cloud provider's 16% growth acceleration in the quarter, up from 12% in the first quarter. They also expressed optimism about IBM's prospects in quantum computing and the potential for the z17 mainframe to drive organic growth above the company's 5% constant-currency target. Wedbush analysts led by Dan Ives maintained an 'Outperform' rating and $325 price target, stating they 'would be buyers of any knee-jerk weakness.' The firm believes IBM is 'well-positioned to capitalize on the current demand shift for hybrid and artificial-intelligence applications with more enterprises looking to implement AI for productivity gains.' Even Bank of America, which lowered its price target from $320 to $310, reiterated its 'Buy' rating on the stock. The analysts described IBM as a 'show me story' on software performance in the second half while remaining 'bullish on overall company trajectory,' expecting estimates to move higher with increasing contribution from high-margin software. During the earnings call, CEO Arvind Krishna expressed optimism about the macroeconomic environment, highlighting strong global technology adoption. He noted that enterprises worldwide are convinced that technology forms the basis for scaling revenue while controlling capital and labor expenses. IBM demonstrated strong momentum in its hybrid cloud and AI strategy, with its GenAI book of business reaching $7.5 billion in inception-to-date sales. Management raised productivity savings targets and increased free cash flow guidance while maintaining confidence in accelerating revenue growth for the full year. IBM's consulting business, while facing near-term headwinds from delayed decision-making and discretionary project cuts, showed encouraging signs with a healthy $32 billion backlog. Krishna noted improved M&A prospects under what he called a 'rational regulation environment,' suggesting potential for strategic acquisitions. The analysts' bullish stance reflects confidence that IBM's portfolio strength, mainframe cycle momentum, and accelerating AI adoption among enterprise clients will drive sustainable growth despite current market volatility. Is IBM Stock Undervalued Right Now? Analysts tracking IBM stock forecast its free cash flow to improve from $12.75 billion in 2024 to $18.21 billion in 2029. Today, IBM stock trades at a forward FCF multiple of 16.6x, which is higher than its 10-year average of 11.6x. Given, an estimated annual FCF growth rate of 7.4% and the tech stock's dividend yield of 2.6%, the tech giant could be priced at 17x forward FCF. This would mean IBM's market cap could surpass $300 billion in the next three years, indicating upside potential of 25% from current levels. If we adjust for dividend reinvestments, cumulative returns would be closer to 35%. Out of the 21 analysts covering IBM stock, eight recommend 'Strong Buy,' one recommends 'Moderate Buy,' 10 recommend 'Hold,' and two recommend 'Strong Sell.' The average target price for IBM is $269, 2% above the current price. On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
18-07-2025
- Business
- Yahoo
Why Ingersoll Rand (IR) Stock Is Falling Today
What Happened? Shares of industrial manufacturing company Ingersoll Rand (NYSE:IR) fell 3% in the morning session after the company's stock was downgraded by a Wall Street firm earlier in the week, and investors showed caution ahead of its upcoming quarterly earnings report. The industrial products company saw its shares downgraded to 'Hold' from 'Buy' by Melius Research on Monday. The firm, which set a $93 price target, pointed to narrowing growth opportunities and greater uncertainty in the company's earnings outlook. Melius also noted potential headwinds for the company in its healthcare and clean technology end markets. Adding to the cautious sentiment, investors looked ahead to the company's second-quarter financial results, scheduled for release at the end of July., Analysts' forecasts for the quarter indicated a potential contraction in adjusted earnings per share, which created further uncertainty for the stock. The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Ingersoll Rand? Access our full analysis report here, it's free. What Is The Market Telling Us Ingersoll Rand's shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today's move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. The biggest move we wrote about over the last year was 5 months ago when the stock dropped 5.8% on the news that the company reported weak fourth-quarter results. Its organic revenue slightly missed and its revenue was in line with Wall Street's estimates. Looking ahead, guidance largely came in below expectations. Overall, this was a softer quarter. Ingersoll Rand is down 5.3% since the beginning of the year, and at $85.72 per share, it is trading 18.6% below its 52-week high of $105.35 from November 2024. Investors who bought $1,000 worth of Ingersoll Rand's shares 5 years ago would now be looking at an investment worth $2,739. Today's young investors likely haven't read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
16-07-2025
- Business
- CNBC
Melius Research's Ben Reitzes: Nvidia's clearance to resume China sales is good news for AMD as well
Ben Reitzes, Melius Research managing director, joins CNBC's 'Squawk on the Street' to discuss expectations for Nvidia following the company's clearance to resume sales in China, the implications for AMD, and more.
CNBC
15-07-2025
- Business
- CNBC
Analysts raise Nvidia price targets after Trump's China chip decision. One sees $5 trillion market cap ahead
Nvidia cleared a key hurdle that restricted the sale of its H20 chips to China, a move that gave some analysts on Wall Street room to raise their forecasts for the stock. The Jensen Huang-led company whose chips power artificial intelligence said earlier Tuesday that it hopes to soon resume shipping H20 general processing units to China after the U.S. lifted restrictions placed on their sale to Beijing in April. "The U.S. government has assured Nvidia that licenses will be granted, and Nvidia hopes to start deliveries soon," the company said in a Tuesday blog post . The statement helped lift an array of other semiconductor manufacturers as well. The news helped ignite a wave of optimism from analysts, with one going so far as to forecast that Nvidia could reach a $5 trillion market value, after only recently having achieved a $4 trillion capitalization for the first time. NVDA YTD mountain Nvidia stock in 2025. Shares have advanced almost 28% so far in 2025, while the S & P 500 has risen less than 7%, according to FactSet data. Here's the latest analyst commentary and forecasts on Nvidia. Melius Research raises price target to $235 per share Analyst Ben Reitzes said that Nvidia could be headed for a $5 trillion market cap, and said "getting back in China after a mid-April ban is a huge tailwind" for the company. Reitzes' forecast calls for more than 43% upside from Monday's $164.07 close. "The news not only means that Nvidia's revenues accelerate even more sequentially in the back half of FY26, but it also adds a huge tailwind to growth in F1H27 - making FY27 a much bigger growth year than the previous consensus of just 26%," the analyst said. "We wouldn't be surprised if all or most of the $8B run rate/quarter in lost China sales came back completely by F4Q26 given pent up demand and boosted FY27 overall revenue growth to 38% y/y after 59% growth in FY26." Oppenheimer hikes price target to $200 per share Analyst Rick Schafer's forecast implies about 22% upside for Nvidia stock. "We see several structural tailwinds driving sustained outsized top-line growth including generative AI, DC/AI accelerators and autonomous vehicles. We believe these factors justify its valuation," the analyst said. Bernstein reiterates outperform rating and $185 per share price target Analyst Stacy Rasgon's outlook implies nearly 13% upside for Nvidia stock. Rasgon said that while Nvidia's second-quarter results likely won't see the company ship enough chips to catch up on lost revenue, the chipmaker is likely to see benefits in the second half that ends next January. "Beyond the revenue/earnings recovery, we are glad to see NVDA able to compete at least somewhat in China as it limits potential for more structural risks," Rasgon wrote. "We always saw the H20 ban as unnecessary and, frankly, somewhat nonsensical as performance of the part is already low, and well below already-available Chinese alternatives; a ban would simply hand the AI market in China over to Huawei as well as encourage the growth of local ecosystem alternatives (with a risk that they filter out of China over time)." "[E]very ~$10B of recovered NVDA China revenues would drive roughly 25 cents in additional EPS," the analyst added. "Therefore, capturing an incremental $15-$20B in China revenue through the rest of the fiscal year would provide 40-50 cents in EPS upside for FY2026, all else being equal (10%+ or so accretion on current consensus?)." Evercore ISI reiterates Nvidia as top pick The firm's $190 per share price target calls for about 16% upside. Analyst Mark Lipacis forecast that Nvidia could see as much as $10 billion in near-term revenue if all the restrictions on H20 chip sales to China are removed. "Assuming 70-75% [gross margins] on $2.75bn of inventories would imply about $10bn in revenues anticipated from those written down inventories on hand, but since the product was written down, that would suggest much higher gross margins on that $10bn of revenues," the analyst said. Citigroup cautiously optimistic Analyst Atif Malik's also has a $190 per share price target on Nvidia. "We believe investors should take a 'wait and see' approach before adding China contribution back to their models," the analyst said. "That said, China is an important market for Nvidia in gaming and networking and it helps to sell some compute chips."
Yahoo
14-07-2025
- Business
- Yahoo
Caterpillar Is 1 of the Largest Industrials Companies by Market Cap. But Is It a Buy?
Caterpillar stock has surged in recent months and is one of America's biggest industrial giants. Melius Research recently upgraded Cat stock to a buy based on artificial intelligence power needs. But a closer look at Caterpillar's valuation shows that the stock costs a lot -- probably too much. 10 stocks we like better than Caterpillar › In a recent June report, Motley Fool researchers identified Caterpillar (NYSE: CAT) as one of the three largest (specifically, the third largest) industrial stocks by market capitalization in the U.S. Valued at $162 billion last month, the stock now costs more than $192 billion. Caterpillar generates more than $63 billion in sales annually, and turns $22.5 billion of this into gross profit. On the bottom line, Caterpillar earned net profit of $9.9 billion over the last 12 months, and the company generated $7.9 billion in positive free cash flow. Impressive statistics all. But are they good enough to make Caterpillar a buy today? Wall Street seems to think so. According to a S&P Global Market Intelligence survey of 25 sell-side analysts who follow Caterpillar stock, 14 of them agreed the stock is a buy. Just last week, that number increased by one when Melius Research upgraded Caterpillar stock to buy and assigned the industrials stock a $500 price target. As Melius commented in a write-up on The Fly, a financial news site, 2027 sales at Caterpillar are likely to grow "materially" as the power demands from artificial intelligence (AI) data centers drive increased need for power from multiple sources, including engines manufactured by Caterpillar. Caterpillar's role in this "power explosion," says Melius, is turning out to be surprisingly big, and gives the analyst reason to recommend Caterpillar stock even after it has already outperformed the S&P 500 significantly over the last 52 weeks, rising more than 21% in price. And yet, just because Melius says Caterpillar stock is a buy doesn't necessarily make it so. Caterpillar's business is made up of three main areas: construction, resource industries (primarily mining), and energy and transportation. The engines business falls within this last category, and it's undeniable that this segment is doing best of all at Caterpillar. Over the past five years, revenue from energy and transportation has surged 30% in total, versus growth of only 20% in resource industries and 13% in construction. To this extent, Melius is right to point out that the engines business is a big revenue driver for Caterpillar. Unfortunately for Melius, and other Wall Street analysts recommending Caterpillar, it turns out that engines aren't a great driver of profits for Caterpillar. Despite its surging revenue, over the past 12 months, the energy and transportation segment has earned just 19.9% operating profit margin for Caterpillar. The slower-growing resource industries and construction businesses, in contrast, earned operating profit margins of 20.4%, and 25.2%, respectively. What does this mean for investors? In dollars and cents, it breaks down as follows. After surging in price over the past year, Caterpillar now boasts a $192 billion market capitalization. On the one hand, that's only 19.4 times trailing earnings, which doesn't sound too expensive. But the devil's in the details here. Caterpillar carries nearly $36 billion in net debt on its balance sheet, lifting its debt-adjusted market cap (its enterprise value) to nearly $228 billion. The company also generates significantly less free cash flow than it reports as net income -- just $7.9 billion over the past 12 months. As a result, the stock's enterprise value-to-free-cash-flow ratio is nearly 29, or roughly 50% more expensive than the stock's P/E ratio might suggest. Factor in only a modest 1.5% dividend yield, and a projected 4.5% long-term earnings growth rate (according to the same analysts who recommend buying Caterpillar), and I can only conclude that this stock, so highly valued by investors, is in fact much too expensive to buy right now. Before you buy stock in Caterpillar, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Caterpillar wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,010,880!* Now, it's worth noting Stock Advisor's total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Caterpillar Is 1 of the Largest Industrials Companies by Market Cap. But Is It a Buy? was originally published by The Motley Fool Sign in to access your portfolio
