IBM dropped after its latest earnings report. Does the dip provide a chance to buy?

IBM (NYSE:IBM) dropped earlier this week after the tech mainstay encountered selling in the wake of its latest quarter results. The firm’s headline results beat expectations, but investors expressed concern about its guidance and free cash flow.

The earnings-inspired decline played into a recent downdraft for the stock, which has fallen in eight of the 10 sessions headed into Friday’s trading. Despite this dip, IBM has still held up better in 2022 than most of its tech peers. Given this relative resilience, does the slide surrounding the release of the firm’s financial figures create a buying opportunity?

IBM’s Recent Earnings 

IBM’s second quarter earning outdid analyst expectations, at least on the headline numbers. The IT giant beat projections on both Q2 non-GAAP EPS and revenue. The stock sported Q2 non-GAAP EPS of $2.31, which topped estimates by $0.02. Meanwhile, its revenue figure came in at $15.45B, up 9% from last year and $360M above estimates.

However, the stock fell 5% in the session following the earnings release, as worries about the firm’s free cash flow forecast overshadowed the other figures. Company CFO James Kavanaugh stated that the company expects its free cash flow for all of 2022 to be $10B, or at the low end of its earlier forecast range of $10B to $10.5B. 

Shares followed its post-earnings dip with another two days of losses. As of the close on Thursday, IBM had fallen about 8% since it disclosed its quarterly figures.

This decline has put the stock in the red for 2022. Shares had shown a slight year-to-date gain headed into the earnings announcement. Now, the stock is underwater by about 6%.

Still, IBM has held up better than many of its peers. The S&P 500 sits 17% lower for 2022 as a whole. Meanwhile, other tech heavyweights, like Microsoft (MSFT) and Alphabet (GOOG)(GOOGL), have dropped more than 20% in 2022. At the same time, firms with similar offerings, like HP (HPQ) and Accenture (ACN), have also underperformed Big Blue, dropping by 14% and 30%, respectively.

Is IBM a Buy?

Most of Wall Street views IBM (IBM) with a neutral stance. Of the 19 analysts surveyed by Seeking Alpha, 11 have labeled the stock as a Hold. Among the rest, four analysts have tagged IBM as a Strong Buy and two see it as a Buy.

On the other end of the spectrum, one analyst has classified IBM as a Strong Sell and another one has placed the firm under a Sell rating.

IBM’s shares currently trade near the $125 mark and analysts have placed an average price point target at $142.76, with a high point of $160 and a low target of $118.

Seeking Alpha’s Quant Ratings fall in line with Wall Street, categorizing IBM as a Hold. Looking closer, the system for grading quantitative measures gave IBM’s profitability an A+ and viewed its momentum as deserving of an A. The stock’s valuation received a B. However, IBM’s outlook has been clouded by its growth stats, which receive a D- from the Quant Ratings system.

See the breakdown below:

Seeking Alpha contributor Bill Maurer falls in line with the majority and lists the stock as a hold as well. Maurer outlined how the strong dollar has negatively impacted the tech and service giant. Furthermore, Trapping Value, another Seeking Alpha contributor, stated that with a global slowdown in the world economies taking place, IBM is not immune to future headwinds.