It hasn’t been a good few weeks for International Business Machines Corp (NYSE:IBM). Shares of the technology behemoth are down more than 10% in the last month and approximately 15% from 2017’s highs of $182.79.
The company’s latest earnings are a big reason why. When IBM announced its latest quarterly earnings back in April, the top line declined for the 20th consecutive quarter. Earnings per share of $2.38 narrowly beat analyst expectations of $2.35. While the organization saw good growth in its “strategic imperatives” division – which includes sources such as cloud and analytics – it wasn’t enough to offset declines from its traditional business.
Things got worse last week. Both S&P and Moody’s slashed the company’s credit rating, citing the continued plunge in revenues. While IBM’s earnings per share still look relatively healthy, aggressive share buybacks are masking the company’s decreased total profitability. In 2013, IBM’s net profit was $16.5 billion. In 2016, it plunged to $11.8 billion. Yet earnings per share only fell from $15.30 to $12.39.
Finally, it never helps when the greatest investor of all-time decides to start selling shares. Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) owned some 81 million IBM shares at the beginning of 2017. He disclosed last week ahead of Berkshire’s annual meeting he sold approximately a third of those shares earlier this year at prices above $180.
He told CNBC “I don’t value IBM the same way that I did six years ago when I started buying. I’ve revised it somewhat downward.”
With these things weighing against IBM, it’s easy to see why investors would be bearish today.
