International Business Machines (NYSE: IBM) reported quarterly earnings on July 19, garnering attention from market participants. With over 60 companies reporting earnings this week, a common thread of a strong U.S. dollar hurting the earnings now continues with IBM.
Namely, the company posted its highest sales growth in a decade, but investors seem worried about the enterprise cutting its cash-flow estimate. The earnings highlighted revenues of $15.54 billion, a 9.3% year-on-year (YoY) increase, beating expectations by $360 million. Further, the earnings per share (EPS) were $2.31, beating estimates by $0.02.
On the flip side, the firm said that its outlook for the year would be impacted by the strength of the U.S. dollar and the company exiting from Russia. Moreover, the pain point for market participants appears to be that the company sees its free cash flow at $10 billion, which is at the lower end of an earlier projection.
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As a result, shares of IBM are sliding in pre-market trading, down over 6%, at the time of writing.
IBM chart and analysis
Before the earnings announcement, the shares had been trading in the upper part of their 52-week range; however, the current pre-market drop has seemingly widened the trading range. If the drop continues, the support zone could be in the range of $129.57 to $123.95, depending on the trading volumes.
Conversely, a resistance zone is now moved to $135.22, with the next resistance level after that at $138.22.
In addition, analysts rate the shares a moderate buy, with the next 12 months’ average price predictions at $147.90, 7.07% higher than the current trading price of $138.13.
IBM has three aspects working against it: the euphoric growth seen by tech companies in 2021, which is now dying down; the rise of interest rates and a possible recession; and finally, a strong U.S. dollar that is hurting their competitiveness versus other EU and Asian companies.
All in all, market participants will likely have to look elsewhere for robust and constant growth as in the short-term it seems as if IBM will likely have reduced growth.
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