What Wall Street Thinks Of IBM's Big Q3 Earnings Beat

International Business Machines Corp. IBM stock jumped more than 9 percent on Wednesday after the company reported a big third-quarter earnings beat. Several Wall Street analysts weighed in on IBM following the report.

Here’s a rundown of what they had to say.

Voices From The Street

Bernstein analyst Toni Sacconaghi said investors should be careful not to confuse a cyclical upswing with a secular inflection point.

“While IBM's Q3 results are encouraging (with total company revenue growth declining 1.3% organically at constant currency), we caution that results appear to have been meaningfully impacted by the launch of IBM's z14 mainframe, and unusual strength in the company's transactional software revenues, which appeared to have pulled in revenues from Q4,” Sacconaghi wrote.

UBS analyst Steven Milunovich said IBM’s quarter was the nest it has delivered in some time, but the stock is still not out of the woods just yet.

“True, the new z14 mainframe and growth in transaction processing software were non-recurring boosters, but the overall results still suggest stabilization,” Milunovich wrote.

See Also: Big Blue's Big Beat: Is IBM's Q3 The Real Deal Or A Flash In The Pan?

Morgan Stanley analyst Katy Huberty said IBM’s impressive organic revenue and gross margin numbers mark inflection points for the stock.

“Low investor expectations & ownership set-up for a re-rating as fundamentals recover post a period of investment,” Huberty wrote.

Bank of American analyst Wamsi Mohan said IBM remains a defensive play given its relatively stable margins and strong balance sheet.

“Longer term, we expect IBM to take share in IT spending with its Cloud and AI initiatives,” Mohan wrote.

Ratings And Price Targets

Despite the earnings beat, Wall Street analysts have mixed feelings about IBM stock:

• Bernstein has a Market-Perform rating and $150 target.
• UBS has a Neutral rating and $160 target.
• Morgan Stanley has an Overweight rating and $192 target.
• Bank of America has a Buy rating and $200 target.

Image credit: Mark Ahsmann (Own work) [CC BY-SA 3.0], via Wikimedia Commons