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Goldman Sachs sets IBM stock target with Buy rating

EditorAhmed Abdulazez Abdulkadir
Published 06/24/2024, 05:18 PM
© Reuters.

On Monday, Goldman Sachs initiated coverage on shares of International Business Machines Corp. (NYSE:IBM), commonly known as IBM , with a Buy rating and a price target of $200.00. The firm highlighted IBM's strategic shift towards long-term growth, emphasizing the company's focus on infrastructure software assets, particularly those related to open-source and artificial intelligence (AI).

The firm noted the strong synergy between IBM's evolving software portfolio and its consulting business, which is believed to be increasingly capturing market share. This combination is expected to drive enterprise business transformation and support the stock's potential to re-rate higher.

IBM's commitment to consistent financial performance was also underscored as a key factor in the firm's optimistic outlook. The firm's analysis suggests that as IBM continues to improve its software business mix, the company's stock is likely to experience a positive revaluation.

The price target of $200.00 represents Goldman Sachs' expectation for IBM's share value, indicating confidence in the company's strategic direction and potential for growth. The Buy rating is a signal of the firm's belief in IBM's prospects and its position within the technology sector.

The coverage initiation and the setting of a price target are based on the firm's assessment of IBM's current initiatives and future potential. The investment firm's comments reflect a positive view on IBM's ability to successfully navigate its business transformation.

In other recent news, IBM's financial performance and strategic shifts are attracting investor attention. The company's revenue and EPS are expected to steadily increase over the coming years, with revenue projected to grow from $60,532 million in 2024 to $65,517 million in 2025, and EPS from $9.13 in 2024 to $10.34 in 2025.

IBM's strategic focus on AI and hybrid cloud services is expected to drive further investor interest, with a significant AI-centric backlog and the potential for Red Hat to reaccelerate its performance.

IBM's recent decision to sell its QRadar product to Palo Alto Networks (NASDAQ:PANW) and the announcement of releasing its family of Granite models into open source are seen as strategic moves to concentrate on more lucrative areas. The company's acquisition of HashiCorp (NASDAQ:HCP), while expected to be initially dilutive, is projected to become earnings per share accretive by 2026.

Analyst firms BMO Capital Markets and RBC Capital Markets have maintained their respective ratings on IBM, with BMO Capital Markets giving a Market Perform rating with a price target of $190.00, and RBC Capital Markets offering an Outperform rating with a price target of $200.00. BofA Securities also maintained a Buy rating on IBM, with a consistent price target of $209.00.

InvestingPro Insights

Goldman Sachs' recent initiation of coverage on IBM with a Buy rating and a $200.00 price target aligns with some of the positive indicators reflected in the latest InvestingPro data. IBM's market capitalization stands at a robust $158.42 billion, and the company has demonstrated a solid financial performance with a gross profit margin of 55.63% over the last twelve months as of Q1 2024. Additionally, IBM's commitment to shareholder returns is evident with a dividend yield of 3.87%, and it has raised its dividend for 28 consecutive years, showcasing its financial stability and investor-friendly approach.

InvestingPro Tips further reinforce the investment firm's outlook, indicating that IBM's valuation implies a strong free cash flow yield and that the stock typically exhibits low price volatility, which could appeal to investors seeking stability in their portfolio. Moreover, as a prominent player in the IT Services industry, IBM's strategic focus on infrastructure software and AI could capitalize on emerging technology trends.

Investors interested in a deeper dive into IBM's financials and potential can explore additional InvestingPro Tips at https://www.investing.com/pro/IBM. There are currently 6 additional tips available on InvestingPro, and by using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights into IBM's performance and prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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