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In the world of technology, IBM has become the darling of darlings.
Sure, Apple is No. 1, but IBM is close behind with a near match on the way it’s valued by Wall Street based on expected earnings.
Just one slight yet significant difference: Apple’s revenues last quarter grew by 58 percent, while IBM’s barely budged at 0.3 percent, which was lower than analysts had expected.
Even on the earnings front, the two companies are night and day: IBM’s operating earnings lurched ahead at around 4 percent, while Apple turned in an explosively impressive 95.4 percent gain.
Yet the stocks of both companies are trading at or near all-time highs.
IBM gets a pass for one simple reason: For several years it has boldly articulated a five-year “roadmap” on how it will get its earnings per share to $20 by 2015. That’s 49% higher than last year. It even breaks it down how it will get there by detailing how much will come from such things as base revenues, acquisitions and share repurchases.
All investors care about is that it’s on track to meet or beat that 2015 number.
I’ve always been leery of long-term, especially those five years out, because too much can happen between here and there.
And whenever a target is at stake, there’s the concern that companies can resort to low-quality ways to hit the target.
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