Stephanie Link & Malcolm Ethridge Buy IBM and Vertiv After Strong Earnings

IBM's Strong Earnings and Strategic Shift

• 💡 IBM reported a strong earnings report, beating on the top and bottom line, with revenues and margins raised.
• 📈 Despite a disappointing software line last quarter, it still grew 11% and accelerated sequentially, with hybrid cloud growing at 14% and automation up 22%.
• 🚀 Infrastructure revenues grew 19%, and consulting grew 3.3%, surprising positively and indicating market share gains against competitors like Accenture.
• 💰 Free cash flow guidance was at the high end, reaching $14 billion, which was better than expected.
• 📊 The company is undergoing a significant transition from a mainframe business to a software and services company, with software and services now comprising 74% of revenue.

Market Reaction and Analyst Debate

• 📉 Despite positive fundamentals and a beat-and-raise, IBM's stock saw a sell-off, trading down as much as 6% after earnings, which analysts found surprising.
• 🧐 The stock's current valuation at 25 times forward earnings is debated, with some questioning how much further it can climb.
• 🔑 Analysts like Stephanie Link and Malcolm Ethridge believe the market is not fully appreciating IBM's transformation and the strength of its recurring revenue model.
• ✅ Both Link and Ethridge bought more shares of IBM, citing the strong fundamentals and the belief that the stock is undervalued given its transformation.

Vertiv's Rebound and Strong Fundamentals

• ⚡ Vertiv, an AI-powered story, is rebounding after a pullback due to perceived market froth and a momentum trade rollover.
• 📈 The stock is up 6% after reporting strong earnings, beating revenue and operating margins by 200 basis points.
• 🚀 Total revenues grew 28%, and orders were up a staggering 60%.
• ⚠️ Despite a dip of up to 6-7% yesterday, Stephanie Link also bought more Vertiv, citing very strong fundamentals that don't justify the stock's decline.
• 💬 The CEO was featured on Mad Money, highlighting the company's performance and positive outlook.