IBM Stock Keeps Gaining Ahead of Monday’s Analyst Meeting. Why There’s Reason for Optimism.
IBM meets with analysts on Monday.
David Paul Morris/Bloomberg
IBM stock keeps creeping higher after the tech company disclosed details on its pending spinoff of the IT services business Kyndryl—and ahead of a meeting with analysts next week.
The stock got an additional boost Friday from Jefferies analyst Kyle McNealy, who launched coverage of IBM (ticker: IBM) with a Buy rating and $170 target price, a potential gain of about 16% from Thursday’s close at $138.93. He thinks there’s a good case for the company to start growing its top line again after a long period of shrinking revenues.
“We see a strong demand environment driven by pandemic recovery and enterprise focus on digitization and digital resiliency,” McNealy wrote in a research note. “After years of transition, we see a solid path for IBM to outperform growth expectations driven by increasing cloud mix in the business, recent strategic actions catalyzing revenue growth, and a leading portfolio to deliver multi-cloud solutions.”
McNealy noted that IBM is “at the convergence” of many key enterprise tech trends, including cloud services, security, data analytics, and artificial intelligence. He wrote that a proprietary survey of IT resellers found IBM to be “the third most considered public-cloud vendor” behind Microsoft Azure and Amazon Web Services, and by extension, ahead of Google Cloud and Oracle .
For hybrid cloud applications, McNealy adds, the company is seen as the number three player, behind market leader Microsoft and just trailing VMware. He added that when customers were asked whether they expect to spend more, less, or the same with various vendors, IBM had more positive responses than any other company tracked in the survey.
McNealy added that he thinks IBM’s growth prospects are better than the Street expects, and are set to accelerate going forward as it completes the Kyndryl spin.
Morgan Stanley analyst Katy Huberty wrote in a research note that she expects the meeting with analysts, set for Monday, to address M&A strategy, go-to-market changes and the company’s hybrid-cloud strategy—and that the session could help boost investor confidence that IBM can sustain top-line growth in the 4%-to-5% range. She thinks the IBM outlook gets more favorable post-spin, with an IBM upgrade cycle coming up, among other things. That said, Huberty kept her Equal Weight rating.
In afternoon trading, shares were up 3.1%, to $143.27
Write to Eric J. Savitz at [email protected]
