Key Takeaways
- Goldman Sachs analysts have rated IBM a Buy, citing moves by the tech giant to boost long-term growth.
- Analysts noted IBM’s growing business in infrastructure software, artificial intelligence and consulting.
- They suggested IBM could gain market share as its AI investments pay off.
IBM (IBM) shares rose 1.5% on Monday after a Goldman Sachs analyst initiated coverage on the company with a “buy” rating, citing the company’s long-term growth and efforts to invest in artificial intelligence (AI). Goldman set a price target of $200, 14% above Monday’s closing price.
The analysts said IBM is “on track to successfully complete a transformation into long-term growth.” They pointed to an improving mix of infrastructure software with a focus on open source and AI products, as well as a “unique and complementary consulting business that we believe is decisively gaining market share.”
AI investments pay off
Goldman Sachs analysts said IBM is in the “middle of the road” of transitioning its portfolio toward a suite of modernized application and infrastructure software and a broader range of services, and is moving away from a legacy-focused business model.
They noted that IBM’s “organic investments in AI products (WatsonX) are finally starting to pay off, and we believe that IBM’s integrated software/services offerings and use of open source LLMs are compelling differentiators that will provide a competitive advantage in client engagements.”
The analysts added that an improving software business mix and the company’s consistent financial performance mean the stock “may continue to command higher prices.” The analysts said they expect IBM to sustain revenue growth of 5-7% over the long term and to grow free cash flow by about 10%.
IBM shares closed up 1.5% at $175.01 on Monday and are up about 7% so far in 2024.
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