International Business Machines Corp. (IBM) shares fell nearly 10 percent on Friday after the Armonk, New York-based technology company reported its fourth-quarter revenue that fell short of analysts’ expectations.
Revenue for the fourth quarter declined 6.5 percent on a year-over-year basis to $20.37 billion, missing the consensus forecast of $20.7 billion. The drop was mainly attributed to the weak performance of its software unit, as customers avoided longer-term deals due to the economic uncertainty caused by the pandemic.
Nevertheless, the company reported adjusted earnings of $2.07 per share, beating analysts’ average estimate of $1.81 per share. Yet, the adjusted profit was well below earnings of $4.79 per share in the year-ago quarter.
Moreover, the company reported adjusted earnings of $8.67 per share for the full year, down from $12.81 per share in 2019. Revenue for 2020 also declined to $73.62 billion, as compared to $77.15 billion in the prior year.
Speaking on the results, CEO Arvind Krishna said in a statement, “our performance reflects the fact that our clients continue to deal with the effects of the pandemic and broader uncertainty of the macro environment.” However, Krishna expects IBM to return to growth in 2021.
IBM stock has lost substantial value since the start of the Covid-19 crisis last year. The stock started 2020 trading around $135. IBM’s share price fell sharply to a low of $94 in March mainly due to the material impact of Covid-19 across its business segments. The stock managed to recover some of its lost value in the subsequent months but could not reach the pre-pandemic price levels.
Meanwhile, most analysts have been recommending investors to “Hold” IBM, with the average price target of $139 per share for the stock. On a year-to-date basis, IBM stock has decreased nearly 6 percent. The company has a market value of $105.688 billion.