CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We raise our target by $27 to $177, on a P/E of 17.5x our ’24 EPS estimate, near peers and above IBM’s one-year average (14.3x) as well as our previous multiple (15.1x). We increase our ’24 EPS view to $10.10 from $9.95 and initiate ’25 at $10.52. We think IBM can structurally lift its multiple as it grows its proportion of recurring revenue (>50% of ’22 sales) and software revenue (42.5% of Q3 sales), while attaching itself to themes like cloud migration and GenAI, allowing it to exhibit resilient growth despite a soft macro environment. We are encouraged by the success of IBM’s AI platform (watsonx) and think its recently-announced AI governance toolkit (watsonx.gov) will find success as conversations accelerate around the responsible application of AI. We note continued high levels of debt ($55B exiting Q3), but we think IBM is positioned to benefit from an improving interest rate environment as debt refinancings become less expensive and IBM’s top-class dividend (4.1%) becomes relatively more attractive.