5 months ago
IBM: Don't Mind Buffett, Says Morgan Stanley, Transformation on Track
Shares of International Business Machines (IBM) are up 57 cents, or 0.4%, at $152.08, after Morgan Stanley’s Katy Huberty this morning wrote in a note to clients that recent pressure on the stock since Berkshire Hathaway’s (BRKA)Warren Buffett indicated he’s reducing his stake, presents a good opportunity, especially as profits are set to expand on the company’s latest mainframe sales cycle. You’ll recall that Berkshire’s Buffett, who has the largest single position in IBM shares, at 6.7% of the shares outstanding, said earlier this month that he had been selling the stock because he “didn’t value” it the same way he did six years earlier. Huberty, who has an Overweight rating on IBM shares, and a $212 price target, writes that it’s no surprise that Buffett’s less enthusiastic, because the profile of the company is changing, but for the better: Berkshire started buying IBM in 2011, a time when IBM was delivering mid teens earnings growth through capturing legacy outsourcing and software spend, businesses that are largely categorized as core rather than strategic today, and through record levels of share repurchases.