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Mark Holder

IBM + Red Hat = +$1 Billion

On Friday, IBM (IBM) provided an update on the financial impacts of the Red Hat merger. The market made too much noise about the dilutive impact of purchase accounting. The key is the boost in free cash flows expected in 2020 and 2021. 

By 2021, IBM is forecasting FCFs to grow from $12 billion to $13 billion. The stock has a market cap of only $130 billion. 

The hybrid cloud leader should be worth more by focusing on cash flows and not earnings impacted by adjustments for deferred revenues. Buy any dip from investors not understanding this merger impact. 

Disclosure: Long IBM

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