Tuesday's IBM Q1 Earnings Must Justify 2019 Rally To Keep Momentum Going

* Reports Q1 2019 results on Tuesday, April 16, after the market close
* Revenue Expectation: $18.52 billion
* EPS Expectation: $2.22

There’s a lot at stake for International Business Machines (NYSE:) when the company reports its tomorrow. Primarily, it needs to prove that investor optimism about its revival is justified and that it’s well on track to consistently beat expectations.

If Big Blue is successful in showing that its turnaround is gaining momentum, this year’s powerful rally—which put the company’s shares among the best performing blue-chip stocks on the —is likely to continue.

Shares of this legacy tech giant, which dominated computing’s early decades with inventions such as the mainframe and later the floppy disk, closed Friday’s session at $144.35 — up more than 25% this year. They’ve gained 34% since hitting the December low, outperforming both the (+20.3%) and the tech-heavy (+26.2%).

IBM weekly chart

IBM bulls have focused on the the fourth-quarter of 2018 and its upbeat forecast for the current year. After beating analysts’ revenue estimates in the Q4, IBM said in January that it expects adjusted earnings per share of at least $13.90 in 2019, ahead of analysts’ predictions of $13.89. This was the second quarter in a row in which IBM showed growth, after six years of revenue declines.

Game-Changing Acquisition

With the recent upsurge in its stock, investors may be concerned that this rally has run its course and the stock is therefore becoming risky. In the short-run, that fear could be true, but we are becoming more confident that the company is on the right track to achieve its long-term turnaround plan.

The linchpin of IBM’s growth strategy was to arrest a slowdown in sales by capturing a larger share of new growth areas of the digital economy. That goal remained

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