An aging tech giant is adapting to the modern day…
IBM was once one of the greatest blue-chip stocks on the market. Now, they’re fighting to claim back the top spot…
This week, IBM announced that it’s splitting into two companies.
They’re letting go of old, outdated technology that isn’t helping their bottom line, while they upgrade their services for the modern era.
IBM is establishing two market-leading companies, each with focused strategies for their respective fields.
Here’s how the companies will be split up.
IBM will be a $59 billion company that focuses on hybrid cloud platforms and artificial intelligence.
They will focus on technology and platform innovation, digital transformations, and significant growth opportunities.
Meanwhile, the second company, temporarily dubbed “NewCo” will be a $19 billion company that focuses on managed infrastructure.
NewCo’s focus will be on IT infrastructure modernization, service delivery excellence, and operational efficiency/cash flow generation.
IBM said in a press release:
“With tighter integration and focus on its open hybrid cloud and AI solutions, IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions.”
This is a smart move by IBM.
They’re effectively getting rid of shrinking, low-margin operations and focusing on higher-profit opportunities.
And investors have already started pouring in.
Where’s the money?
Immediately following this news, IBM’s stock shot up seven percent.
Investors are reacting bullishly to the news, and financial analysts all over the table are praising IBM for an intelligent decision.
What’s more, by trimming off low-margin operations, IBM is slashing multiple operational expenses down to zero.
And by creating two separate companies to hyper-focus on their respective fields, IBM is becoming a leaner, meaner player in the IT space.
The days of the old, lunkering IBM are over, and this could prove very profitable for everyone involved.
How can I get some?
IBM’s stock dropped dramatically when the COVID19 pandemic started swinging in full force.
At the time of writing, IBM stock is sitting at $129.
The stock has been moving up and down since April, but it remains stuck around this price point.
It’s still too early to tell how much higher the stock will go.
That’s why I won’t be following the uptick of investors following the news.
Instead, I would look to invest in IBM if it pulls back closer to its March 2020 prices below $100.
Trading tip of the week…
A trader’s win rate doesn’t matter, the only thing that really matters is their profit and loss (P&L).
For example, if a trader loses $1,000 each on four trades, but then makes $5,000 on the next trade, their win rate is only 20% but their P&L is higher.
Win rates aren’t the end all be all, some trades will win and some trades will lose, this is part of the game.
The only thing that matters is how much more money we have at the end of the day.
Earnings report that caught my eye…
I’ve taken care of digging through the numbers for you, and I’ve found an earnings report that has captured my complete attention.
JPMorgan Chase & Co.(JPM) will announce their earnings tomorrow, before the start of trading.
But nobody is expecting the big bank to have a strong quarter.
Analysts predict that earnings have declined as much as 19% in Q3, and revenue is expected to have fallen at least 6.3%.
These low expectations and weak forecast is causing traders to bet against JPMorgan.
There just seems to be very limited upside, and many believe there’s no upside whatsoever.
I’m curiously looking forward to their earnings report, and will keep you updated with any big news.