IBM Stock Receives High Street Targets Ahead of Earnings

As IBM prepares to release its third-quarter earnings report on October 23rd, analysts from Goldman Sachs and Bank of America have set new high price targets for the company, indicating increased confidence in its performance.

Goldman Sachs has raised its price target for IBM from $220 to $250, while maintaining a Buy rating on the stock. Likewise, Bank of America has established its price target at $250, reflecting a positive outlook for the tech firm.

Analysts at Bank of America highlighted anticipated strength in IBM’s software segment, particularly due to improving trends in transaction processing and services related to Red Hat. They estimate that the company will report revenue of approximately $14.9 billion and earnings per share (EPS) of $2.22 for the third quarter, closely aligning with the consensus estimates of $15 billion and $2.21, respectively.

Despite expectations of flat year-over-year consulting revenues due to a pullback in discretionary projects, the consulting segment is expected to benefit from backlog conversions and opportunities in generative AI.

IBM’s shares have increased around 40% year-to-date, compared to a 20% rise in the S&P 500, fueling optimism about the company’s turnaround efforts, particularly improvements in revenue growth and free cash flow. Additionally, Bank of America mentioned that the upcoming mainframe cycle in 2025 contributes to this positive sentiment.

The bank reiterated its Buy rating, citing the ongoing turnaround efforts, defensive portfolio, and attractive dividend.

As IBM navigates challenges in its consulting division while capitalizing on software and AI opportunities, analysts believe the company is well-positioned for strong performance, justifying their optimistic price targets.