A week after Josh Brown said he couldn’t find anything good to say about IBM Corp (NYSE: IBM), Hightower’s Stephanie Link says there’s a chance that it could be like Microsoft.
What IBM is doing right
Link recalled how Microsoft was trading around $50 just five years ago, and then CEO Satya Nadella essentially reinvented the company – something that IBM could do too. On CNBC’s “Squawk Box”, she said:
I do think there’s a chance that IBM could actually catch up. They have a ways to go, but they’re trying to transform themselves as well into cloud, AI, blockchain, and growth businesses.
Microsoft reported another record quarter last night, and Link says she couldn’t find a single “negative” in the earnings report.
IBM is trading at a very cheap multiple
Link agreed that IBM wasn’t even close, at the moment, to what Microsoft did, and it continues to face challenges in terms of execution and consistency, but was convinced that IBM might still be moving in the right direction.
Look at what they’re doing. They’re spinning off slower-growth businesses. They’re making a ton of acquisitions, and the stock is trading at a very cheap multiple. Plus, you get a yield while you wait for the transformation.
IBM closed its landmark $34 billion acquisition of Red Hat in mid-2019. The world’s leading provider of enterprise open-source solutions grew 17% in the latest reported quarter, and Constellation Research’s Holger Mueller says IBM is yet to unleash the true potential of Red Hat.
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