Tech giant International Business Machines (IBM) recently received praise from Wall Street. Indeed, investment firm Bank of America (BAC) kept its Buy rating on the stock and raised its price target to $310 per share. The firm’s analyst, five-star-rated Wamsi Mohan, said that IBM’s move toward higher-margin software is a key driver for future growth, especially when it comes to free cash flow. As a result, although IBM’s transaction processing revenue, which depends on its mainframe business, has been a bit volatile, the overall outlook remains strong.
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This positive view comes as IBM introduces new products like the z17 mainframe and the Spyre accelerator cards built for AI. These technologies are expected to increase transaction processing and help IBM grow its revenue. In addition, Bank of America believes that strong shipments of MIPS (a measure of computing power) add upside potential and points to IBM’s stable financial position as another reason to be confident in the firm, as it benefits from recurring sales, cost-cutting opportunities, and steady profit margins.
With a solid balance sheet and competitive AI products, IBM is viewed as a defensive investment that still offers growth potential as demand for AI and high-performance computing expands. Therefore, when combining all of these factors together, Mohan believes that IBM is positioned to gain more market share in enterprise computing and cloud services.
Is IBM a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on IBM stock based on seven Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $297.33 per share implies 19.6% upside potential.
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