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IBM stock maintains buy rating on AI portfolio strength

EditorAhmed Abdulazez Abdulkadir
Published 05/24/2024, 10:54 PM

On Friday, BofA Securities maintained a Buy rating on IBM (NYSE:IBM), with a consistent price target of $209.00. The endorsement followed IBM's announcement at the Think 2024 event in Boston, where the company revealed that it would be releasing its family of Granite models into open source.

IBM's approach to language models (LLMs) is to offer smaller, more manageable options that enterprises can adopt more readily, particularly for inferencing tasks. This strategy aligns with the current market where LLMs are known for being costly to train and operate.

The firm remains optimistic about IBM's ongoing transformation, highlighting continued revenue growth and free cash flow (FCF) improvement. BofA Securities pointed to IBM's "defensive portfolio, attractive dividend yield, and underappreciated AI portfolio" as key factors for their positive stance. The AI portfolio's value is notable, with a cumulative book of business exceeding $1 billion.

In their commentary, BofA Securities did not propose any changes to their financial estimates for IBM. The price objective of $209 is based on an 18x enterprise value to calendar year 2025 free cash flow per share of $13.

IBM's recent developments and BofA Securities' reaffirmed rating reflect the company's strategic steps towards strengthening its position in the AI market and its overall business trajectory.

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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