IBM is in a strange position at the beginning of 2019. When they reported their earnings at the time, analysts noticed that their sales have been a little too weak across most of their segments. This leads them to believe that their market share would decrease as 2019 goes. However, the Street strongly disagrees, saying that investors should not fear and stay long.
The IBM Problem
During the past couple of months, there were a couple of reports indicating that IBM is struggling to grow its business. This tech giant is fearful that their shares could drop even further, resulting in a decrease in the total stock value. But, market participants are still interested in IBM’s stock, although the interest is slowly declining over time.
If we take a look at 2015, they had around $40 million interest figure with 2.80% of the floating stock. Going forward to the end of 2018 and the beginning of 2019, they are at their all-time low. With the $14 million interest figure and just about 1.53% of the floating stock, IBM seems to be in trouble.
Is The Market Shorting?
Well, not exactly. The IBM stock is shorting and they pay a reasonably-sized dividend. The yield is around 5% mark and this means that anyone who holds a short position wouldn’t get paid any dividend. Going short on IBM is definitely a risky bet and adds a substantial cost. If we think about it, that’s the main reason why the short interest in IBM hasn’t go up.
As mentioned before, IBM’s sales have been modest during the past few quarters. But, this doesn’t mean that the market share would decrease during the next few months. The interesting fact is that institutions bought the company’s shares in the last reporting cycle. For the long-side retail investors, this means that they should remain patient and stay long on IBM. We’ve yet to see how their share and sales will behave.