IBM is now at a two year low, with a multi-year low trailing multiple.
Few differences from the last time the stock was trading under such conditions:
1. EPS was growing. Currently, eps is declining.
With a declining eps, earnings and revenue there is really no justification for a market normalized PE. A lowend PE is justified.
2. Proper financial engineering is meant to make cash productive, creating a higher premium to the stock. Leveraging the obvious supply / demand dynamics caused by a lower float but a demand, caused by solid fundamentals needs to exist. Even management knew this quarter was a bust, and probably the next few quarters will be too, because there was negligible buybacks last quarter.
If the stock is going to trade at a lower multiple range (10.5-12), then IBM could trade between 163-180. This range is also supported by the monthly chart highlighted above.
The biggest differentiater IBM has going for it is the incorporation of Watson, and how it could be leveraged within the cloud, mobile and enterprise. But for now, IBM is a show me story, worthy only of trades from extremely oversold conditions.