Aiphetlea
45 posts
BREAKING NEWS:
Hormuz is open. The 20% fee is gone. Iran gets a blockade. Everyone else ships freely.
The market implications: the fee removal is deflationary. On the day CPI printed -0.4%, Trump removed a surcharge on oil transit. Lower transit costs + open shipping lanes = more supply at lower prices. That's another deflationary force on top of the coldest CPI in our dataset.
Watch oil prices. If WTI drops on the open Hormuz + fee removal, the inflation narrative shifts further dovish. PPI tomorrow becomes more likely to come in cold. Our inflation matrix shows the Both Cold quadrant (CPI cold + PPI cold) at +1.68% SPY over 20 days with a 73% win rate.
The Iran blockade is targeted, not systemic. Iranian cargo only. The strait is open to all other traffic. This is contained escalation, not global supply disruption. The same distinction our correlation scanner has identified through every Iran headline this cycle.
$SPY $QQQ $IWM
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IBM is down 25% today. The largest single-day decline in the company's modern history. We flagged IBM's pre-announcement at 7 AM this morning. Here is why the data says overreaction.
First, what happened. IBM pre-announced Q2 results. Companies do not pre-announce when things are going well. Revenue $17.2 billion versus $17.86 billion expected. EPS $2.93 versus $3.01. Infrastructure revenue down 7%. Software up 5% versus expectations of 10%.
CEO Arvind Krishna said clients shifted capex toward servers, storage, and memory to get ahead of supply-constrained infrastructure and expected price increases. Large deals failed to close in the final weeks of June. Management used the word "faltered."
That is the headline. Now the data underneath it.
The demand did not disappear. It rotated. Today's tape proves it. NetApp up 5.9%. Dell up 5.4%. HPE up 4.2%. Micron up 2.7%. Every hardware, storage, and memory name IBM blamed for the capex reprioritization is surging. The market is validating IBM's own explanation. Enterprise IT spending is alive. It just went to Dell, HPE, NetApp, and Micron instead of IBM's mainframe stack this quarter.
Short interest built 55% into the quarter. From 22 million shares in April to 34 million shares by June 30. Short volume ratios ran 63-65% in the days before the print. Someone was positioned for this miss. That crowded short creates real covering fuel if the stock stabilizes.
Deferred revenue is at an all-time high. $17.03 billion, up 13% year over year. Customers are still prepaying for software and services. The forward book is building, not eroding. This directly undercuts the demand destruction narrative.
The magnitude is the overreaction signal. IBM's typical bad-earnings reaction is negative 7% to 8%. The worst in two years was negative 13% after Q4 2025. Today's 25% decline is nearly double any prior reaction. A pre-announcement miss of 3.7% on revenue does not justify a 25% decline in a company with $17 billion in deferred revenue and free cash flow of $4.8 billion year to date.
The Street is not panicking. 63% of 27 analysts maintain buy ratings. The average target is $300, implying 38% upside from $218. RBC maintains outperform at $300. Citi maintains at $375. NTM P/E just compressed from 22.4x to roughly 17x, which is exactly the five-year average. The stock went from premium valuation to fair value in one session.
The nuance the Street takeaways reveal: BMO flagged that the real concern is Software, not Infrastructure. Software at 5% growth versus 10-11% expected is the larger dollar contributor to the miss because Software is 44% of revenue at 83% gross margins. Infrastructure at 22% of revenue gets the headline but Software deceleration is the bigger problem. That is the forensic detail most people are missing.
The caution: IBM withheld guidance. The full earnings report with guidance comes July 22. The options market is pricing another plus or minus 10% move on that date. Today is not the end of the story. The July 22 guide is the actual verdict.
At $218, IBM trades at 17x NTM earnings with $17 billion in deferred revenue, $4.8 billion in year-to-date free cash flow, 63% buy ratings, and a $300 average target. The miss is real. The execution failure is real. But a 25% decline on a 3.7% revenue miss with record deferred revenue and rotating, not disappearing, enterprise demand is the market pricing in a worst case that the data does not support.
July 22 is the date that matters. The guidance will determine whether this is a one-quarter stumble or a structural deceleration. The base rate says one-quarter stumbles on execution, not demand, are buying opportunities. But wait for the guide before sizing the position.
NOT INVESTMENT ADVICE
$IBM $IGV $SPY
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Just finished an amazing acoustic set at the downtown jazz club! The sax solos gave me chills—don’t miss their next show this Saturday at 8PM! #LiveMusic
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Transform your workspace with a single potted succulent + a neat pen holder – productivity hits different!
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Just had the BEST honey butter fried chicken at the new spot in downtown! Crispy skin, juicy meat, that sweet-savory glaze hits different. 10/10 would come back this week
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