Evercore ISI has reiterated its Outperform rating and $240.00 price target on IBM (NYSE: NYSE:IBM), ahead of the company's third-quarter earnings report scheduled for release after the market closes tomorrow.
The firm anticipates IBM to present a moderate upside compared to the consensus revenue and earnings per share (EPS) estimates of $15.0 billion and $2.22, respectively.
The analysis by Evercore ISI suggests that the fundamentals of IT spending are stable or improving, which, along with the rise in AI-driven consulting demand, positions IBM favorably.
The firm also expects IBM to capitalize on software market opportunities, especially given the ongoing disruptions at competitor firms, potentially boosting its Red Hat (RHT) and Transaction Processing Platforms (TPP) segments.
For the full year of 2024, Evercore ISI projects that IBM will maintain its guidance for mid-single-digit constant currency revenue growth and a free cash flow (FCF) exceeding $12 billion. The fourth-quarter revenue estimate of $17.9 billion, which aligns with or is slightly below historical seasonality, could see an upside due to a more favorable foreign exchange environment, potentially influencing revenue expectations for the calendar year 2025 (CY25).
In other recent news, IBM has launched its latest artificial intelligence models, Granite 3.0, aimed at business applications. This move strengthens IBM's position in the generative AI market. Financial services firm Stifel has raised its price target on IBM shares to $246 and maintained a buy rating. Stifel anticipates a strong year for IBM in 2025, with software acquisitions expected to add to revenue growth.
IBM has also acquired Prescinto, a provider of asset performance management solutions, to enhance its Maximo Application Suite. This acquisition supports IBM's position in the energy and utilities sector. RBC Capital Markets has raised its price target for IBM to $250, maintaining an outperform rating, reflecting confidence in IBM's financial performance and strategic initiatives.
Furthermore, BofA Securities has maintained a buy rating on IBM and increased the price target to $250. BofA Securities aligns with consensus estimates, forecasting revenues and earnings per share of $14.9 billion and $2.22 respectively for the third quarter.
InvestingPro Insights
As IBM prepares to release its third-quarter earnings, InvestingPro data and tips offer additional context to Evercore ISI's optimistic outlook. IBM's market cap stands at $213.48 billion, reflecting its significant presence in the IT services industry. The company's P/E ratio of 25.18 suggests investors are willing to pay a premium for its shares, possibly due to its strong market position and growth potential.
InvestingPro Tips highlight IBM's financial stability and growth trajectory. The company has raised its dividend for 28 consecutive years, demonstrating a commitment to shareholder returns that aligns with Evercore ISI's positive stance. Moreover, IBM's stock is trading near its 52-week high, with a remarkable 75.67% price total return over the past year, indicating strong market confidence.
The revenue growth of 3.04% over the last twelve months, while modest, supports Evercore ISI's projection of mid-single-digit constant currency revenue growth. Additionally, IBM's robust EBITDA growth of 121.69% over the same period suggests improving profitability, which could contribute to the anticipated free cash flow exceeding $12 billion.
For investors seeking a deeper understanding of IBM's potential, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's financial health and market position.
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