On Thursday, BofA Securities adjusted its outlook on shares of IBM (NYSE:IBM), increasing the price target to $220 from the previous $200 while maintaining a Buy rating on the stock. The firm highlighted the company's strategic focus on portfolio optimization, with approximately 75% of IBM's business now concentrated in Software & Consulting.
The report noted IBM's strong cash flow projections, with expected cumulative cash flows surpassing $19 billion from calendar year 2024 to 2026 after dividends. This financial flexibility, coupled with the company's ability to borrow, is anticipated to support IBM's continued emphasis on mergers and acquisitions. The target range for M&A is projected to be between $1 billion and $10 billion, with the aim of achieving free cash flow accretion within two years.
BofA Securities underscored that these strategic acquisitions are set to contribute to incremental revenue growth and free cash flow over time. Since Arvind Krishna took the helm as CEO, IBM has completed 39 acquisitions, primarily in the software sector but also in consulting.
The firm reiterated its confidence in IBM's ongoing transformation, which is characterized by revenue growth and free cash flow improvement. IBM's defensive portfolio, attractive dividend yield, and underappreciated artificial intelligence capabilities were also cited as reasons for the positive outlook on the stock.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.