IBM Stock Deserves to be Part of the Blockchain Rally

 Anything associated, even vaguely, with blockchain or bitcoin has been exploding in the last weeks and months. But International Business Machines Corp (NYSE: IBM) has not caught the same wind. It's a strange development, given IBM's push in blockchain technology. So, what about the price of IBM shares?

There is an irrational exuberance in the blockchain / bitcoin world. While investors can debate the merits of Bitcoin, the price action on other assets is screaming "bubble."

What about Riot Blockchain Inc (NASDAQ: RIOT)? A few months ago, this was a questionable biotechnology company. So, you need a 12% stake in a small Canadian cryptocurrency exchange and suddenly it's up to 740% in three months and 345% in a month? Insane.

The Crypto Company (OTCMKTS: CRCW) is worth $ 12 billion? Anyone cares to venture what exactly this company does, that the SEC has just quit trading until January.

Finally, what about Longfin Corp (NASDAQ: LFIN)? The shares of LFIN rose by 1,240% in about a week and have a market capitalization of close to $ 4 billion. This company had revenues of $ 28.1 million from February 1, 2017 through June 30, 2017 and a gross profit of $ 4.4 million. Seriously? A valuation of $ 4 billion, all because it acquired Ziddu.com, a company that works with blockchain.

So, what does all this have to do with IBM?

IBM and Blockchain

This is not a diatribe about bubbles. Instead, it's evidence of how hot the bitcoin, blockchain and cryptocurrency markets have been ... that is, unless we're talking about IBM stock. Despite IBM's efforts to implement blockchain technologies in its cloud services and other applications, it has not pleased him. In fact, one could argue that he has not received any love at all.

Two quarters ago, IBM said it is working with seven banks in Europe to launch the technology. A year earlier, IBM issued a research report that said 15% of banks were looking to implement blockchain technology. By 2020, that figure jumps to approximately 66%. I would bet that number is even higher now.

In addition, IBM Systems senior vice president Tom Rosamilia spoke about several blockchain applications from IBM's perspective. He spoke of mobile transactions in the range of $ 30 billion per day. He mentioned Wal-Mart Stores Inc (NYSE: WMT) and its food supply chain in China, which minimizes contamination and pinpoints exactly where the contaminated filaments come from. Rosamilia also spoke about improvements in logistics operations as well.

"All those things can be accelerated, and we can eliminate that inefficiency of the system with blockchain," he explained during a global technology conference organized by UBS. More recently, IBM mentioned blockchain several times in its third quarter conference call:

•     "We continue to launch new blockchain partnerships and networks, including an initiative with a group of retailers and leading food suppliers, including Walmart, [Kroger Co (NYSE: KR)], Dole, Nestle and [Unilever NV (ADR) (NYSE: UN )] to address food security, and we are partnering with UBS and several global banks to build a platform based on block chains to support trade financing. "

•      "We also launched our blockchain services practice that will include more than 1,500 consultants who can help companies implement blockchain-enabled business models."

Final reflections on IBM's actions

Blockchain is not the only thing that the administration was discussing last quarter. In fact, much was said about machine learning and the cloud, both solid growth segments for other technology companies. Just listen to the telephone conferences of Nvidia Corporation (NASDAQ: NVDA), Microsoft Corporation (NASDAQ: MSFT) and Alibaba Group Holding Ltd (NYSE: BABA).

IBM is using all the right buzzwords and participating in the right markets, but something is wrong: revenues. IBM has seen a quarterly decrease in revenue for more than five years. However, analysts predict that sales will fall by only 0.1% next year. Which means that the quarterly streak of revenue decline should end sometime in 2018. In addition, analysts expect earnings growth of around 1.5% this year and 1% next year.

Good growth? Not even close. But we are talking about an action with a future price-earnings ratio of 11 and a dividend yield of almost 4%. In other words, the price of IBM shares is a very low risk holding for investors. I would not sink the savings of my life into it, but Big Blue offers a decent performance, with a lottery ticket to make important progress in the blockchain world.

Previously, he was a buyer in the range of $ 135 to $ 140, since strong support is near those levels. However, I am not sure that the price of IBM shares goes that far. Stocks are trading well now and there is an uptrend in place. In addition, $ 150 has been a significant level in the past. On that now, I like IBM.