Jefferies Analysts Initiate IBM Shares at Hold Amid Software Momentum

Summary

  • IBM has received a ‘Hold’ rating from Jefferies analysts with a price target of $180 per share.
  • The analysts are encouraged by IBM’s software momentum, despite no signs of a breakout play.
  • Jefferies has praised IBM’s transformative movements towards a software-led story, including strategic acquisitions and investments.
  • IBM is considered a hidden AI play with strong potential in consulting.
  • Despite its advantages, IBM’s growth rate and operating margin are below that of its software competitors.

Jefferies’ Stand on IBM

Jefferies research analysts have commenced their coverage of IBM (NYSE:), asserting a ‘Hold’ stance in a notice distributed on Friday. Their target share price for IBM is $180. The analysts expressed their optimism regarding the software momentum at IBM, despite seeing no explicit breakout play.

IBM’s Transformation

Jefferies has highlighted IBM’s significant “transformative moves” towards becoming a software-centred business, which includes strategic moves like the acquisition of Red Hat, the Kyndryl spinoff, and investments in AI and its overall software GTM strategy.

IBM’s Potential in AI

Furthermore, Jefferies views IBM as a “hidden AI play” that shows more promise in the consulting sector than in software. The report indicated that IBM, with the Watson platform, could potentially gain considerable exposure to the Gen AI workload.

However, the researchers believe that the more significant AI opportunity in the strategic consulting arm is because most clients are still in their Gen AI strategies’ early stages and require guidance on efficiently using these technologies.

IBM’s Comparison with Competitors

Yet, despite these factors favouring IBM, Jefferies points out that the tech giant’s growth rate and operating margin remain below its software peers. The analysts concluded, “While IBM shares can continue to make steady gains, we believe there’s a limit to potential progress in the absence of a significant acceleration in software growth.”

In the realm of forex or trading, the performance and strategic positioning of corporations like IBM could influence the stock market trend and subsequently sway currency values and asset prices. Thus, these evaluations and directions from financial institutions like Jefferies possibly bear implications for traders and investors to consider in their decision-making process.

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