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Why IBM’s Stock Just Fell to a 52-Week Low

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Jul. 27 2017, Published 1:00 p.m. ET

IBM stock fell to its 13-month low

Last week was a challenging one for International Business Machines’ (IBM) investors as the company’s stock fell more than 4% on July 18, 2017, after the announcement of its fiscal 2Q17 results.

In the week ended July 21, IBM’s stock fell to 13-month low levels of $146.71. Lower-than-expected fiscal 2Q17 results, marking 21 quarters of no revenue growth, weighed heavily on the stock, which has fallen more than 11% YTD (year-to-date) in 2017.

Despite numerous initiatives like investments in cloud and disruptive technologies like blockchain, IBM was again unable to report revenue growth. The Strategic Imperatives segment’s growth last quarter didn’t provide much hope.

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IBM stock’s underperformance

IBM stock’s fall had an impact on the Dow Jones Industrial Average (DIA), wherein it features among one of 30 Dow Jones stocks based on dividend yield. Based on share price, IBM is the fifth-largest stock in DIA. In this index, companies with less outstanding stocks or higher prices have a considerable influence over the movement of the index, even if the other players with lower stock prices make up a bigger share of the market.

Notably, IBM was chosen as one of Cornerstone Macro’s 2017 Dogs of the Dow, primarily due to its dividend yield.

IBM and SPY

IBM has also underperformed the S&P 500 Index (VOO). YTD, SPY has generated a return of 10.1%, while IBM stock has fallen ~7%.

Despite the ups and downs, the S&P 500 is the best-performing sector this year, having seen a ~23% advance in the past year. The index has been having a bull run since the US elections, as hopes for fiscal and tax reforms have improved investors’ sentiments. Improvements in corporate earnings over the past few quarters have also added to a positive outlook for the US economy (SPY).

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