Four-star Stifel analyst David Grossman kept a Buy rating on IBM (IBM) and a $290 price target after attending the tech company’s investor event at its annual user conference. He said that the event focused on how IBM is using AI, along with its hybrid cloud tools like Red Hat, to help businesses adopt AI. Grossman highlighted three key areas that could drive both short and long-term earnings:
Using AI internally to boost margins and free cash flow
Turning internal AI tools like watsonx Orchestrate into customer products
The upcoming mainframe cycle (z17)
Grossman explained that IBM’s use of AI inside the company could help reduce costs and increase profits. This would allow IBM to spend more on things like research, marketing, and mergers, which are areas where it has struggled to invest in the past. He also said that watsonx Orchestrate could become a commercial product that helps other businesses increase productivity and gives IBM access to a bigger market opportunity.
Finally, Grossman pointed to the next generation of IBM’s mainframe, z17, as a way to win back business that moved to x86 servers or the cloud. Over time, IBM may even offer mainframe services in an “as-a-service” model. Interestingly, though, while Grossman sees IBM as more growth-focused than it has been in years, he still believes that the stock will likely be treated as a safer, more defensive option in the short term.
What Is the Target Price for IBM?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on IBM stock based on eight Buys, five Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $259.92 per share implies 4.8% upside potential.
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