Interesting to hear this from IBM, especially after years of shilling Watson and moving from being a growth business to the technology audit and share buyback model.
It’s been a different order of magnitude. IBM repurchased approximately half their outstanding stock. This is consistent with a low growth company that doesn’t know how to grow any more. (And isn’t bad - if you can’t produce a return on retained earnings, give them back to shareholders. Buybacks are the most efficient way to do this.)
I can’t explain why they have a PE ratio of 36 though. That’s too high for a “returning capital” mature company. Their top line revenue growth is single digit %s per year. Operating income and EBITDA are growing faster, but there’s only so much you can cut.
You may be right on the quantum computing bet, though that seems like an extraordinary valuation for a moonshot bet attached to a company that can’t commercialize innovation.
also because the market (correctly) rewards ibm for nothing, so if they’re going to sit around twiddling their fingers, they may as well do it in a capex-lite way.
I'm still flumoxed by how IBM stock went from ~$130 to $300 in the last few years for essentially no change in their fundamentals (in fact, a decline). IBM's stock price to me is the single most alarming sign of either extreme shadow inflation, or an equities bubble.
Why do you say the market correctly prices it this way?
