RBC Capital Markets has recently initiated coverage on IBM’s stock, giving it an Outperform rating and a price target of $188. This suggests a 28% increase from Tuesday’s closing price. Analyst Matthew Swanson believes that IBM’s software business is greatly “misunderstood and undervalued”, especially in regard to its contributions to AI and spend optimization. Furthermore, the company’s role in enabling hybrid cloud environments has been touted as “unique”.
Swanson explains that while IBM currently generates 75% of its revenue from software and consulting, investors tend to predominantly view the company through the lens of its hardware and services divisions. In comparison to its consulting peers, IBM trades at a “significant discount” in relation to its software counterparts.
“We’re optimistic about IBM’s competitive positioning and the unique role it plays in the tech ecosystem,” says Swanson, highlighting their ability to facilitate efficient digital transformations through their consulting and software offerings.
Despite RBC’s favorable outlook, only 28% of analysts that cover IBM have given it a Buy rating, with 67% rating the shares as Hold. The average price target stands at $147.47, representing a modest 0.6% increase from the Tuesday closing price.