Krishna said IBM has entered into a virtuous cycle, one where free cash flow provides the revenue needed to drive growth, which in turn provides even more free cash flow. The company expects to generate $35 billion in free cash over the next three years.
IBM continues to be a leader when it comes to technology consulting, Krishna added.
IBM doesn't go it alone, Krishna said. The company partners with the best in the business including Microsoft (MSFT) , Amazon (AMZN) , Salesforce.com (CRM) and Box (BOX) , just to name a few. IBM is an ecosystem, he said, so even if they share revenue in some areas, there will always be a service opportunity for IBM.
Let's check out the IBM charts.
On Sept. 22, we reviewed IBM's charts and recommended that, "Traders could approach the long side of IBM on a close above $136. Add on strength above $140."
In the updated daily bar chart of IBM, below, we can see that the shares have improved since our Sept. 22 review and now trade above the bottoming 50-day moving average line. IBM survived the test of the 200-day line.
The daily On-Balance-Volume (OBV) line has inched up from the middle of September pointing to increased aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator is close to the zero line and a cross above it will be a new buy signal.
In the weekly Japanese candlestick chart of IBM, below, we can see some improvement from our last review. Prices have moved higher.
The OBV line has turned upwards and the MACD oscillator has narrowed further towards a new buy signal.
In this updated daily Point and Figure chart of IBM, below, we can see an upside price target of $168.
In this weekly Point and Figure chart of "Big Blue," below, we used a five-box reversal filter. Here the software projects the $190 area as a price objective.
Bottom-line strategy: Continue to hold longs recommended in our Sept. 22 review. Use a $136 stop loss order. The $168 area is our first price target. Look for further gains into the year-end.