IBM gets a Wall Street-high price target from Oppenheimer

Oppenheimer analysts published a bullish initiation of coverage on IBM on Friday, spotlighting software sales growth as a bright spot and the potentially rich growth in AI-related businesses to develop as reasons for their “overweight” rating:

“Our bullish stance is predicated upon the following: (1) IBM’s software portfolio should see sustained ‘double-digit’ revenue growth driven by strength in Automation (primarily HashiCorp) and improving growth in RedHat; (2) Consulting should grow at a sustained ‘low-single-digits’ with recovery in application development/management; and (3) additional revenue optionality with creation and management of AI applications (incl. Generative AI).

We believe these drivers will result in strong expansion activity with existing customers, and drive continued gross (on higher software mix) and pre-tax margin expansion. The stock should also re-rate higher when IBM’s pivot to software is more widely appreciated.”

Investors have seemed to focus on IBM’s software business, which merely met expectations last quarter, contributing to a post-earnings stock slide.

But beyond that, the Street’s view on the stock is pretty divided, with 11 of the 21 analysts covering the stock rating it a “buy” or the equivalent, while six have the stock at “neutral” — or as I like to call it, the gentleman’s “sell” — and four others officially branding IBM a “sell.”

Oppenheimer’s price target of $360 is indeed ahead of the consensus price target of about $292.50, which is roughly where the stock is currently trading. IBM is up about 34% this year, which is what it returned last year, as well.