Diamonds and Dogs

9/26/18

Big Blue having a good day. IBM is up 2.6% following an upgrade and a $180 price target. The analyst thinks his reverse discounted-cash-flow analysis suggests that the market is pricing in a 2% decline in sales, a figure that IBM can beat. Moreover, his sum-of-the-parts model also shows that investors are assigning virtually no value to its hardware business, which he characterizes as "unrealistic." The downside is IBM has to compete with Amazon, Google, Microsoft, Apple and others. 

Nike (NKE) didn't do it. Nike is down 2% following earnings last night. The company actually beat estimates, but the beat was mostly due to lower costs and not better than expected sales. Nike made news last month with their controversial ad campaign featuring former NFL player Colin Kaepernick. The campaign, along with Nike's increasing efforts to woo younger customers with new sneakers and jerseys, had led to Wall Street expectations that the company would lift its outlook for the full year.