IBM
International Business Machines Corporation
$253.84
Stable Earnings Power
40%
P/Adj-EPS × Normalized Multiple
Mild
·
Conviction
Overvalued
Trading 11.4% above fair value
You pay
$253.84
Bear
$182.22
Fair
$227.79
Bull
$273.34
Bear
$182.22
-28.2%
$12.41 × 12x P/E
Fair
$227.79
-10.3%
$12.41 × 15x P/E
Bull
$273.34
+7.7%
$12.41 × 18x P/E
Key Value Driver
Normalized P/E multiple (15x base case)
Implied Market Multiple
20.5x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $305.09 from 50 analysts, using a 35% weight on analyst consensus. That produces an estimated intrinsic value of $227.79 per share.
Warnings
Dividend-based valuation: $97.10 (below our primary estimate by 48%). Large gaps may signal the dividend doesn't reflect full earning power.
Wall Street's average price target is $305.09 (from 50 analysts). Our estimate is 39% below the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples