Long term investors should take a look at IBM (IBM). IBM is set to announce quarterly earnings today. Intel’s quarterly earnings have given insight into the IT market. For the first time in a long time, companies are resuming CAPEX spending on IT hardware and equipment. As the world’s number one server manufacturer, IBM stands to directly benefit from the rise in demand due to corporate IT spending.

Analysts are looking for revenue of $22.75 billion dollars and an EPS of $1.93. Analysts are expecting earnings growth of 13.5% and sales growth just south of 5%.  IBM shares currently trade at $130 which is about 12 times the current year’s earnings estimate of $11.12. Shares trade at 10.8 times next year’s earnings. So, is now the time to buy IBM? I believe investors can buy the shares ahead of the quarter. The worst case scenario is that IBM may suffer a slight drop if earnings are not robust due to raised expectations. For long term investors, I think that IBM is cheap based on future growth prospects. Analysts such as Louis Miscioscia of Collins Stewart believe that IBM could earn $17 a share by 2014. Any weakness in the stock should be looked at as an opportunity to add shares.

Investors interested in IBM may also want to take a look at Dell (DELL). Dell is a solid value play on the resurgent PC market. Dell still has 12% of the PC market. With good numbers reported by chipmaker AMD; it appears that analysts may be underestimating Dell. Dell is one of AMD’s largest customers and AMD just reported a 33% increase in sales.  After 5 years of negative earnings growth, analysts are only looking for 4% sales growth this quarter and 0% growth next quarter. If Dell can exceed these low targets, the stock should rally.

I do not currently own shares of Dell or IBM.


Photo by: ChrisDag