'Not Your Father's IBM' - Analyst Says Company's Shift To A Software-Centric Company Is Overlooked
International Business Machines Corporation (NYSE:IBM) shares are trading higher on Tuesday.
Oppenheimer analyst Param Singh initiated coverage on IBM with an Outperform rating and a price forecast of $320.
Per Singh, the tech behemoth will experience sustained double-digit revenue growth in its software portfolio, mainly due to Red Hat offerings.
Red Hat has recently broadened its product offerings through several partner integrations, which could drive high-teens to 20% growth for the segment, surpassing consensus expectations, Singh writes.
Additionally, the analyst highlights that IBM has the opportunity to expand cross-selling once the HashiCorp deal is finalized.
The analyst also sees an inflection in consulting growth in the second half of the year, driven by a recovery in application development and management.
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Additionally, IBM’s potential in AI applications, including Generative AI, provides further growth opportunities.
This combination of factors will lead to stronger expansion with existing customers, improved margins, and a higher stock valuation as company’s software pivot gains recognition, the analyst adds.
The analyst writes that IBM’s successful shift to a software-focused company has been overlooked and forecasts revenue and margin growth to surpass consensus.
The analyst notes the stock is still mainly covered by IT hardware/services analysts.
Price Action: IBM shares are trading higher by 2.2% to $254.75 at last check Tuesday.
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Latest Ratings for IBM
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Jan 2022 | BMO Capital | Maintains | Market Perform | |
| Jan 2022 | UBS | Downgrades | Neutral | Sell |
| Jan 2022 | Goldman Sachs | Initiates Coverage On | Neutral |
View More Analyst Ratings for IBM
View the Latest Analyst Ratings
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