RESEARCH TRIANGLE PARK – IBM’s stock is down this Monday on the heels of a less-than-encouraging report from an analyst at UBS.

As reported by Barron’s, UBS analyst Munjal Shah wrote a note to clients on Monday that trends in IBM’s (NYSE: IBM) global technology services, which accounts for 35 percent of the company’s revenue, aren’t looking promising He cited a backlog down $10 billion from 2016 and signings that are down 9 percent in the first three quarters of 2019.

According to the report, Shah thinks those two metrics need to stabilize if investor confidence is to be restored.

Shah lowered his rating to Neutral from Buy and slashed his price target to $140 from $170. He wrote that it would be hard for the company to increase its revenue by the mid-single digits on a sustainable basis because of pressure facing legacy businesses.

“New mainframe and ($34 billion) Red Hat acquisition would drive revenue growth next year,” Shah wrote. “However, beyond 2020, Red Hat contribution to growth lessens and mainframe compares are difficult.” summed up the analysts’ note:

“Analyst Munjal Shah forecasts the company’s legacy tech businesses will have negative pressure in 2020, with 2021 being even more challenging for the segment as the returns from the company’s acquisition of Red Hat become incrementally weaker.”

Analysts’ views of IBM are mixed:

  • 4 rate it as a “strong buy”
  • 3 see it as a “buy”
  • 15 see it as a “hold”
  • 3 rate it as “underperform”

However none call it a “sell.”

Red Hat is based in Raleigh. IBM employs thousands of people across North Carolina and operates a big campus in RTP.

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