Ibm Story Behind Market Charge

Investors looking for a reason and almost any reason will do - behind the run-up in the stock market in recent weeks need look no further than those three mighty letters IBM.

The computer giant has seemingly returned to its past days of glory as the darling of Wall Street.

In recent days, Big Blue has been the play in the market.

Perhaps its most stunning move in the market came last Friday after a Merrill Lynch analyst raised his target price for the stock to a whopping $195. On the news, IBM shares shot up $8.12-1/2 to close the day at $145 - its highest point since August 1987.

The Merrill analyst had previously put a ceiling of $150 a share on IBM but said he now expects sales to rise 10 percent in the fourth quarter to $24 billion. He sees improving opportunities in Europe and noted that PC sales and service revenue could match the 25 percent growth rate of the third quarter.

Then on Monday, IBM’s stock price rose a modest $1.75 a share after Morgan Stanley raised its 12-month target price to $170, up from $145.

Tuesday, the company’s shares rose another $7.38-1/2 to close at $1.54.12-1/2. The company’s Aptiva got solid support from Consumer Reports, which could help boost its sales.

The stock closed Friday at $158.50.

While the Wall Street forecasts of $170 or $195 are still well above current price, they pale in comparison to Value Line’s long-term projections. Looking out to 1999-2001, Value Line sees the stock ranging from $175 on the low side to a high of as much as $265 a share.

That forecast came in late October when the shares were trading a shade less than $130 and its analyst, George Niemond, said he was “looking for good share net growth starting in 1997.”

“The earnings gains we project for the three to five years ahead should allow the stock to continue outpacing the market. Too, given its strong cash flow, IBM probably will continue to buy back shares, which should help keep a floor under the stock,” he said.