IBM has a history of declining upon an earnings announcement, after a solid run in the stock. And decline it did. IBM went from 211 to 194. An 8% decline in three days. (Part of that decline was due to the negativity Google caused with their botched earnings release.)
The report was consistent with IBM's current strategy shifting its business to higher margin-higher profits-with less revenue. (This is not new, and a theme consistently touted throughout the last few years.) But from a superficial perspective, I guess its never nice to see revenue declines from all segments of operation from a transparent company despite the consistent earnings. (Interesting fact, the word decline appeared as many times as increase within the earnings report.)
(Just an FYI, a currency hit is not new to IBM, but this quarter seems like currency has been an issue across the board with many multi nationals ranging from Coka, Goolge to IBM. Seems like the firms these multi-nationals pay to smooth out currency fluctuations dropped the ball this quarter. Further mitigating the issue.)
IBM has been slowly raising its trailing multiple. But with the recent decline, IBM is now trading below a trailing PE of 14.
The negativity may take some time to wash out, but the story is still intact. If the trailing PE remains at 14, and with an accelerating 4rth quarter it should be higher, IBM should be back above 200.
AAPL so far has just seen the decline, we will see earnings next week.
My thesis on AAPL has not changed. With AAPL having a known history of re-accelerating earnings (at a massive scale) during the Christmas season, a trailing PE below 14.5 is difficult to justify, even if the current quarter is a bust.
Factoring the current quarter's numbers, AAPL should see a stock price of mid 600s (640) with a multiple of 14.5. In the mean time, AAPL will get a very oversold condition soon, that will allow for a oversold bounce.
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