5 big analyst AI moves: Apple lifted to Buy, AI chip bets reassessed
Investing.com - Bernstein SocGen Group has reiterated its Market Perform rating and $280.00 price target on IBM (NYSE:IBM) following the company’s third-quarter results. The tech giant, currently trading near its 52-week high of $301.04, has delivered a strong year-to-date return of 30.54%.
IBM delivered what Bernstein described as a "lukewarm beat" on revenue, earnings per share, and free cash flow, with strength primarily coming from its mainframe and consulting businesses. The company, with a substantial market capitalization of $265.48 billion, maintains a P/E ratio of 34.34 and modest revenue growth of 2.69%.
The technology company’s Red Hat segment showed disappointing deceleration, which reportedly contributed to IBM shares declining in after-hours trading. Despite this slowdown, Bernstein noted that IBM reported strong bookings growth and expressed confidence that Red Hat would return to mid-teens year-over-year growth.
Transaction Processing also underperformed, which IBM attributed to customers focusing more on the mainframe IBM Z following the recent z17 launch.
Bernstein slightly raised its estimates for IBM but maintained its price target, stating that the company’s transformation to higher growth and profitability "led by software and in particular hybrid cloud, has already played out."
In other recent news, IBM reported strong third-quarter earnings, with revenue reaching $16.3 billion and earnings per share at $2.65, marking a 7% growth in constant currency. This performance was bolstered by a 9% increase in software growth, a 2% growth return in consulting, and a 15% rise in infrastructure, driven by the z17 mainframe cycle. IBM also announced a successful run of a key quantum computing algorithm on standard AMD chips, a significant advancement toward commercial quantum computing. Meanwhile, Stifel lowered its price target for IBM to $295, despite maintaining a Buy rating, due to concerns in the software segment, even as the company posted a 7% year-over-year revenue growth and 16% earnings per share growth. RBC Capital also reduced its price target to $300 while keeping an Outperform rating, citing concerns about the deceleration in Red Hat’s performance. Conversely, BMO Capital raised its price target to $305, highlighting better software growth and a return to growth in consulting, along with solid margins and free cash flow. Evercore ISI maintained its Outperform rating with a $315 price target, following IBM’s earnings that exceeded expectations. These developments reflect IBM’s mixed but generally positive recent performance.
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