News and analysis

Shares of International Business Machines (IBM) were down 6.6% in extended trading on October 22 and lower in early U.S. Thursday morning. The famous computing firm delivered upbeat quarterly numbers but missed some expectations in total sales outlook. Slowing growth in the cloud infrastructure segment also contributed to the stock's corrective mood. While more than 80% of price gains over the past 18 months, including 13% of an additional rise above spring highs to fresh all-time peaks above $300 per share as recently as October 7 could perhaps be attributed to the investors' fatigue from this too speedy race of IBM. By the way, it's approximately spring high at $266.45 where the price has slid so far to test this area from above.

Yet, current fundamentals and growing AI-related hopes are still here. As a bright example, IBM’s generative AI Book of Business (the term used by the company itself to track momentum in those specific strategic areas of its business) drove Q3 growth again across nearly its entire product and service portfolio like software, hardware and consulting offerings as it grew to $9.5 billion, up $2 billion vs Q2 results. This very AI book even outweighed the economic impact of such an innovation as the System z17 mainframe upgrade introduced earlier this year.

“AI adoption is accelerating and hybrid cloud remains the foundation of enterprise IT,” IBM President and CEO Arvind Krishna commented during the conference call with analysts. However, sales growth in the hybrid cloud unit, also known as Red Hat, decelerated from 16% growth in the previous quarter to 14% within three months ended by September 30. The pace is highly expected to return to "mid-teen percentage", or "close to that level, entering 2026", Arvind Krishna said, but this issue somehow stole major attention from total Q3 sales of as much as $16.33 billion, which clearly surpasses average pool estimate of $16.09 billion, according to LSEG data.

Software revenue reached $7.2 billion, up 10%, with automation revenue particularly gaining 24% YoY. Some challenges in the consulting market previously led to public concerns that IBM’s consulting sales could show nearly zero growth, but actually the company reported its consulting revenue of $5.3 billion, up 3% percent, including a 5% pace in intelligent operations and a 2% growth in strategy and technology consulting. This reflected "growing demand for AI services as clients need help designing, deploying and governing AI at scale,” Krishna noted. If so, this can hardly be considered a weakness, just as the negative aftertaste is unlikely to be long-lasting from the slightly slower than everyone would have liked, but still very rapidly growing high-margin segments.

The stock was just overpriced before earnings and very soon will find more money flows to invest into. A replay above our target levels just over or around $300 per share that were already held in summer and later shown again in October is the base case for the end of 2025, while the current discount is still over 10% if counting from October 7 peaking price to the vicinity of $268.50 at Thursday opening bell, while the price range from $235 to $255 looks like very strong technical support on IBM charts.

And we have another record on Wall Street. One can hardly believe that only ten days have passed since the epic correction of October 10, with so many volatile moves in gold and crypto, and equity markets as well. However, the tech heavy Nasdaq 100 has made history again, setting its new all-time high above 25,200 points during the first hours of October 21. The benchmark index of 100 companies with huge market capitalization recovered so quickly thanks to investors' calmness regarding the Sino-American trade dispute and remarkable gains from Apple Co. The issue with a value of now about $4 trillion added nearly 4% in a single trading session this Monday to close the day at $262.24.

The climb provided Apple with the position of the second most valuable company in the world after AI-chip giant Nvidia, which is probably going to rise soon too. The fresh data from research firm Counterpoint confirmed that the iPhone 17 series outperformed its predecessor by 14% in early sales in both China and the U.S. This was a crucially positive sign amidst tariff concerns. Many reputable investment houses hastily added Apple to their list of potential outperformers prompting further potential to beat average market bets for the October-to-December quarter report, as the company is set to publish Q3 2025 report on October 30-31 night. Analysts especially noted the growing number of online orders in Asian countries, which was evidence of solid initial demand at launch already. In August, Apple pledged $100 billion in additional U.S. investment to sidestep tariffs damage, reviving the company's growth momentum. Google-parent Alphabet with $3 trillion of its market value also made a solid contribution hitting a new record high of $256.55 to cap 50% gains over the past four months.

Wall St sentiment also got a boost, when U.S. president Donald Trump said in a TV interview that his meeting with Chinese counterpart Xi Jinping in South Korea will go ahead later this month and the U.S. is "going to be fine with China". As we supposed a week before, he promoted the concept of a triple-digit tariffs on China that would not need to be implemented after November 1 or whenever. Besides, U.S. Treasury Secretary Scott Bessent noted he expects to meet with Chinese Vice Premier He Lifeng this week, preventing an escalation regarding levies. Chinese sources say both sides held "constructive discussions" already.

By the way, even if the Nasdaq 100 and the S&P 500 broad market indicators may slip some later after hitting fresh record highs, historical experience shows "no penalty for buying S&P 500" even at all-time highs, according to investigations of the Bank of America. They said in a client's note that investors should not fear buying U.S. equities at record levels, as “over the past fifty years, S&P 500 returns showed no penalty versus buying on any other occasion, and five years later there was on average a meaningful boost”. While “buying equities at all-time highs may feel like a mistake,” historical performance suggests otherwise. However, our team of analysts is banking on at least 7,000 for the S&P 500 accompanied by 28,000 as the next target for Nasdaq 100 futures by the end of the year. Both benchmarks are propelled by possible Federal Reserve interest rate cuts next week and then again in December together with a very strong earnings season. A major pullback would barely happen before then.

Shares of Nestlé jumped by 9.3% on Thursday. The Switzerland-based firm is famous for its long history dating back to the 1860s and a vast portfolio of very popular brands of food, snacks and beverages like KitKat chocolate bars, Nescafé and Nespresso coffee, Gerber nutrition for babies, and Purina pet care. The company reported solid “real internal growth" (RIG) than it was widely expected, even though outlining some cost reductions plans under new chief executive Philipp Navratil.

RIG is a financial metric that measures a company's sales growth purely from volume increases, while stripping out the balloon effect of price hikes and acquisitions. RIG compares the current year's sales volume, valued at the company's prices of the previous year, to the actual sales of the prior year. This seems different from the concept of organic growth, which reflects overall results including new products and opening new locations. While Nestlé 's organic growth for the first nine months of 2025 was at 3.3%, it was reportedly driven by 0.6% of RIG plus about 2.8% from pricing. Meanwhile, its last quarter's organic growth improved to 4.3%, with RIG rising to as much as 1.5%.

The huge progress that has impressed investors so much is complemented by the firm's restructuring plans to generate extra annual savings of CHF 1 billion by 2027. This may come at the cost of cutting 16,000 jobs globally within a frame of the so-called “Fuel for Growth” program. You may like this or not, but market crowds usually like such things when they are effective. Everything is sold everywhere as fast as possible. Americas reported CHF 25.3 billion in sales with 2.5% organic growth. Asia, Oceania and Africa posted CHF 15.3 billion with 2.7% growth. Even the stagnating EU countries altogether recorded CHF 12.8 billion with 4.3% growth in sales. China's market reduced organic growth by 0.8 percentage points in the third quarter, but there is a great potential to contribute more.

Records among product categories are confectionery (+8%), powdered and liquid beverages like  Nescafe Dolce Gusto (Nesquik) etc (+7.5%), Nespresso (+6.7% of organic growth fuelled well by pricing and double-digit numbers in the US and Canada, waters & premium beverages like Maison Perrier and Sanpellegrino (+4.4%). And all this taken together will generate operating profit margin exceeding 16% and supposedly more than CHF 8 billion in free cash flow in 2025. The accomplished clear break through the "double bottom" pattern technical resistance this week has already resulted in a price touch of above CHF 83, paving the path for the further move to at least CHF 90, if not CHF100.

Navratil said his priority is to strengthen growth through sharper execution and disciplined resource use. “Driving RIG-led growth is our number one priority,” he emphasized, as “the world is changing, and Nestlé needs to change faster”. I can't read his mind but I am buying this.

The luxury industry faces something similar to 2020 when there was a high demand due to COVID-related passion to wealth accumulation. In the pandemic time, the money printing press was leading to devaluation of both the Dollar and the Euro. Now, the ongoing cycle of interest rate cuts on both sides of the pond is fulfilling this job pretty well. When looking at the madly climbing Gold prices, now above $4,000 per troy ounce, rich families think that branded items from Louis Vuitton bags to Moet champagne will soon become even more expensive. They no longer put off expensive purchases for later, but spend money to save even more later. As a result, shares of LVMH (Louis Vuitton Moet Hennessy) controlled by French billionaire Bernard Arnault have made their best performance in over two decades this week.

The stock added more than 10% to its market value to reach €300 billion euros, which also brought almost $70 billion per day to consolidated market caps of the whole European luxury industry reflected by the STOXX Europe Luxury 10 index, Reuters calculated. This outpaced the last big buying spree for the segment, which happened in early 2024. The jump from under €540 at closing price of October 14 to the new highs of around €610 the next day has been prompted by LVMH quarterly results, which demonstrated huge luxury demand in China. The world’s top group in the industry soared as much as 13%, substantially exceeding consensus estimates as it hit over €40 billion in three-month sales for the first time ever. By the way, all major LVMH rivals like Hermes, Kering, Richemont or Burberry, immediately gained between 5% and 9% on hopes that China's demand show will go on.

Sales in mainland China turned most positive, as shoppers were responding to new store experiences, such as Louis Vuitton’s cruise ship boutique in Shanghai. This happened despite the recent property crisis and some trade war effects. Chinese nationals reportedly account for a third of all global luxury sales in the segment. Sales were above expectations across all LVMH divisions like span beauty and jewellery, fashion and spirits, and hotels as well. The only thing is that its fashion and leather goods division, which was considered as the group's profit driver, improved from the previous quarter, but still declined 2% YoY. Again, some experts are feeling that the next potential speedy acceleration will come only in the second half of the next year, as more collections from new and popular designers will enter stores in the second quarter of 2026.

Anyway, rising momentum hints that a recovery to at least €750, where LVMH stock has been already at the beginning of 2025, then followed by moderate stagnation in sales, is inevitable in nearest months while higher targets could be postponed and achieved in 2026, indeed. Nevertheless, UBS upgraded LVMH to Buy, lifting its target price to €680 from former €513, as "actions taken by the company to improve performance in its crucial Fashion & Leather Goods division are proving effective". This implied as much as 33% upside from LVMH’s current market price of just around €600. It's worth recalling the €886.15 peak price for LVMH in March 2024. Since then, the global inflation pressure has been eating away at consumer demand, but now cheaper money combined with more and more expensive precious metals are starting to help luxurious shining.