Goldman Sachs has reiterated its Conviction Buy rating and $250.00 price target on IBM (NYSE: NYSE:IBM).
The firm's analysis suggests that despite a revenue shortfall in Consulting and Infrastructure, the strength in IBM's Software segment, particularly with a 14% growth in Red Hat, is a positive indicator.
IBM is also expected to continue margin expansion, with a 100 basis points pre-tax income improvement forecasted for the year.
Moreover, the company's free cash flow outlook remains unchanged following an increase in the second quarter.
The firm acknowledges the underperformance in IBM's Consulting revenue, which is anticipated to extend into early 2025, but views the recent pullback in the stock price as a buying opportunity.
This perspective is supported by expectations of further acceleration in the Software division in 2025. Goldman Sachs emphasizes the importance of the Software results to IBM's stock, which has remained robust.
IBM's Artificial Intelligence (AI) bookings also show strong performance, with over $3 billion in bookings to date, marking a $1 billion increase sequentially. This achievement is seen as an additional positive factor that could contribute to share gains in IBM's Consulting business over the medium term.
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