IBM's stock is popping after blowing through Wall Street revenue estimates (IBM)

pulse

October 18, 2017 3:02 PM

IBM's stock price is rising after beating earnings expectations.

IBM's stock is up about 8% on Wednesday morning.
The company beat earnings expectations for the third quarter based, in part, because of its focus on cloud computing.

IBM's stock price is up 7.85% to $157.83 on Wednesday after reporting an "impressive clean EPS print," according to Amit Daryanani, an analyst at RBC. It was the largest jump in stock price after earnings for IBM since 2002, according to Bespoke Investment Group.

The company crushed its third-quarter earnings report, coming in with non-GAAP earnings of $3.30 per share, compared to the $3.28 per share expected, on revenues of $19.15 billion, compared to the $18.59 billion expected.

Total third-quarter revenue was down slightly from last year's $19.23 billion, but revenue from IBM's cloud business saw a jump of 20% compared to the same time last year. Cloud revenue is a relatively new area of focus for the company.

"We see potential for IBM to sustain revenue/EPS upside once again in Dec-qtr largely driven by f/x (300bps tailwind in Dec) and z14 refresh cycle," Daryanani said in a note to clients Wednesday morning.

Daryanani rates IBM as neutral, with a price target of $160, which is 1.9% higher than the company's current stock price. Daryanani did not update that price target after IBM's earnings beat.

If IBM is to focus on and grow its cloud business, Daryanani said that the company could be worth reconsidering in terms of a rating and price target. Cloud computing is one of the hottest areas of tech right now and IBM is still working to grow its foothold in the space. The company released its System Z mainframe computers recently, which helped grow its total systems revenue to $1.7 billion, which is 10% higher than the same period last year.

IBM's total revenue declined in the third quarter, which was the 22nd-straight quarter of declines, but Daryanani said IBM has a chance to break that streak with its current focus.

IBM is down 5.37% this year after its post-earnings bump.