IBM (IBM) stock is nearing a return to record territory for the first time in a decade. But one bullish analyst say investors are still underestimating the growth prospects for the century-old tech giant known as Big Blue.
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“We think current street models for (2025) appear fairly conservative and should macro remain stable/improve, there is room for SIZABLE upside to revenue/free cash flow expectations next year,” Evercore ISI analyst Amit Daryanani wrote to clients Wednesday, with caps to underscore “sizable.”
With the new report, Daryanani reiterated an outperform rating for IBM stock and upped his price target to 240, from 215.
On the stock market today, IBM stock slipped a fraction to 204.46 in morning trades. Shares initially climbed to a record intraday high of 207.56 before easing back. IBM’s all-time high closing price is 206.31, made back in March 2013. The stock has gained 28% so far this, compared to a 13% gain for the S&P 500.
IBM Upside From AI, New Acquisition
Daryanani and a team of analysts at Evercore expect IBM has upside to the roughly $66.3 billion in 2025 revenue that analysts currently project for the company. That would represent roughly 5% growth, an acceleration from the 2% projected for 2024.
But, Daryanani notes, integrating HashiCorp (HCP) into IBM’s business could provide revenue upside. IBM announced a deal in April to acquire the cloud-software provider for $6.4 billion.
Similarly, Red Hat could boost software revenue growth beyond estimates if it can sustain double-digit growth into 2025, in Evercore’s view. IBM acquired Red Hat, a cloud software provider, in 2019.
Meanwhile, Evercore sees potential upside to consensus estimates for IBM’s consulting business.
“Although the macro backdrop has weighed on this segment, we think the combination of easing year-over-year compares and AI tailwinds could drive growth above 3%,” Daryanani wrote.
Evercore’s price target of 240 is the most bullish among Wall Street analysts, as tracked by FactSet.
“While we do think IBM’s growth will accelerate next year; street estimate for 5% growth is fairly conservative and should macro remain stable we could see room for sizable upside (very high single digit growth) and free cash flow could be in the $13.5 billion+ range – implying plenty of upside ahead on the name,” Daryanani wrote
Evercore’s price target of 240 is the most bullish among Wall Street analysts, as tracked by FactSet. On average, analysts hold a price target of 198.50 for IBM. Of the 21 analysts following the stock, 43% rate it a buy, according to FactSet. Meanwhile, 33% of those analysts are neutral and 24% hold sell calls.
IBM Stock Nears Record Close
IBM stock broke out from a cup-with-handle base buy point of 196.26 on Aug. 21, according to IBD MarketSurge pattern recognition. Shares have hovered near a 5% buy zone in the weeks since.
Overall, IBM has gained more than 40% in the past 12 months. Shares of the more-than-century-old tech giant rallied starting late last year, helped by excitement about AI and improvements in the company’s revenue growth and free-cash-flow generation.
In July, IBM said it had a backlog worth more than $2 billion in AI-related work. The growing backlog has helped convince investors that the technology could power new growth for the company. IBM has a long history with AI. While OpenAI’s ChatGPT powered the latest wave of AI excitement, it more than a decade ago that IBM’s Watson supercomputer became a “Jeopardy!” champion. IBM is now offering broader enterprise AI services under the title WatsonX.
Meanwhile, IBM stock has an IBD Composite Rating of 87 out of a possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
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