Stifel maintains IBM stock Buy rating with $290 target

On Tuesday, Stifel analysts maintained a Buy rating on IBM (NYSE:IBM) stock, with a price target set at $290.00. According to InvestingPro data, IBM’s stock is currently trading at $254.51, near its 52-week high of $266.45, with analyst targets ranging from $170 to $300. During IBM’s annual user conference, the company presented an investor event that showcased its AI initiatives and hybrid-cloud capabilities, particularly through its Red Hat software and services. With a substantial market capitalization of $231.76 billion and annual revenue of $62.83 billion, IBM remains a prominent player in the IT Services industry. Stifel’s analysis highlighted three key areas that they believe will influence IBM’s earnings growth both in the short and long term.

Firstly, Stifel noted IBM’s internal efforts to deploy AI as a significant factor for margin expansion and free cash flow (FCF) growth. This deployment is expected to enable IBM to increase internal investments in areas such as research and development, marketing, sales, and mergers and acquisitions, which have traditionally been a challenge for the company.

Secondly, the strategy behind Watson Orchestrate was identified as an opportunity for IBM to commercialize its internal AI investments. This could potentially increase productivity within IBM and allow the company to tap into an additional total addressable market (TAM).

Lastly, the analysts pointed to the upcoming mainframe cycle with the z17 as a potential moment for IBM to regain workloads that have shifted to x86 servers and cloud platforms. In the longer term, there is an opportunity for IBM to offer these services in an "as-a-service" model.

The report concluded with a positive outlook on IBM’s focus on growth, which appears stronger than it has been in recent memory. This optimism is supported by IBM’s impressive 54.14% return over the past year and strong gross profit margin of 57.04%. However, the analysts also acknowledged that IBM’s stock is likely to remain a defensive holding in the near term. For deeper insights into IBM’s valuation and growth potential, including 12 additional ProTips and comprehensive financial analysis, visit InvestingPro.

In other recent news, IBM has been actively showcasing its advancements in artificial intelligence (AI) and cloud solutions. At the IBM Think 2025 event, the company introduced Watson Orchestrate’s comprehensive agent capabilities, highlighting its strategic focus on integrating AI across enterprise operations. Despite these developments, UBS maintained a Sell rating with a $170 price target, expressing a cautious stance on IBM’s valuation. Meanwhile, Morgan Stanley (NYSE:MS) kept an Equalweight rating with a $233 price target, acknowledging IBM’s potential to capitalize on the growing generative AI sector. BMO Capital Markets also maintained its Market Perform rating and $260 price target, recognizing IBM’s potential in enhancing its software portfolio, particularly in the agentic AI market.

Additionally, IBM has announced a collaboration with Lumen Technologies to develop AI solutions for real-time data processing at the network edge. This partnership aims to integrate IBM’s Watson AI products with Lumen’s Edge Cloud infrastructure to improve decision-making and AI innovation. In another strategic move, IBM is partnering with Oracle (NYSE:ORCL) to integrate its AI portfolio with Oracle Cloud Infrastructure, aiming to enhance enterprise productivity through AI-driven solutions. This collaboration will allow IBM’s AI agents to be operable on Oracle’s platforms, focusing initially on human resources applications. These recent developments reflect IBM’s ongoing efforts to expand its AI and cloud capabilities across various industries.

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