IBM Announces Blockchain Joint Venture With Maersk Before 4Q17 Earnings

IBM 4Q17 earnings are set for release on Thursday after closing bell, and it’s been quite a busy week already for the tech giant. One firm upgraded IBM stock ahead of that earnings report, stating that the upgrade is for the company’s growing cloud opportunities. However, the double-upgrade comes the same week as the announcement about the new IBM-Maersk blockchain joint venture.

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IBM-Maersk blockchain joint venture announced

IBM and the Denmark-based shipping giant said this week that they’re uniting to expand the use of the blockchain within the shipping industry. The IBM-Maersk blockchain joint venture builds upon the partnership the two firms started almost a year ago, when they said they were beginning a blockchain-based tracking service for cross-border shipments across the world’s oceans.

They two companies decided to create a new entity so that they could market the technologies they built under that partnership, even to transportation companies that compete with Maersk. Further, the IBM-Maersk blockchain joint venture is aimed at fast-tracking the development of new technology, management said.

As of now, the IBM-Maersk blockchain joint venture doesn’t yet have a name, but the two companies did say that it will offer two services in the beginning. The first is a digital pipeline of information for supply lines to be used by all involved companies. The second service to be offered by the IBM-Maersk blockchain joint venture is digitization and automation for paper filings that are required for shipping via smart contracts that are based on blockchain technology.

Here’s what analysts have to say about the IBM-Maersk blockchain joint venture

KeyBanc analyst Arvind Ramnani said in a note to investors that he believes the IBM-Maersk blockchain joint venture offers “significant promise.” He noted that the creation of a separate entity services to reduce conflict of interest and expects it to drive a broader adoption of the ecosystem created by the partnership. He believes it could be just one of many JVs IBM ends up creating across several areas of the blockchain.

Ramnani pointed out that the IBM-Maersk blockchain joint venture isn’t a startup because several major firms have already been using the platform created by the partnership, including Dupont, Dow Chemical, Tetra Pak and Port Houston. He also said that General Motors and Proctor & Gamble are interested in using it to improve their supply chains.

IBM stock upgraded two notches (for cloud strength)

In his own note to investors on Wednesday, Barclays analyst Mark Moskowitz upgraded IBM stock two notches from Underweight to Overweight and raised his price target from $133 up to $192. He feels the company could end up becoming “the next important cloud vendor after Amazon and Azure” eventually. He said that customers might begin shifting their cloud strategies to involve multiple vendors to avoid “lock-in or technology complacency,” and as a result, IBM’s strategic revenues should become a larger piece of the pie than its legacy revenues, which he said implies that “the worst may be over.”

Although he doesn’t expect the cloud headwinds to subside immediately, he does expect some benefit in the coming years. He also cited valuation in his upgrade of IBM stock, saying that its multiple has remained stuck over the last year while the multiples of other stocks have climbed by an average of “2.3 turns.”

IBM 4Q17 earnings preview

KeyBanc’s Ramnani offered a preview of IBM 4Q17 earnings in a note earlier in the week. He said he was “optimistic” going into the IBM 4Q17 earnings release, even after IBM stock has outperformed the S&P 500 since the third-quarter release. He said consensus is looking for IBM 4Q17 earnings to come in at $5.16 per share on a non-GAAP basis and $22.07 billion in sales.

IBM stock jumped by about 3% to as high as $169.06 in intraday trading on Wednesday.