IBM stock gets Street high targets ahead of earnings

Investing.com -- Ahead of its third-quarter earnings report scheduled for October 23rd, IBM (NYSE:IBM ) has gained new Street high price targets from Goldman Sachs and Bank of America, reflecting growing confidence in the company's performance.

Goldman Sachs analysts recently raised the price target on IBM from $220 to $250, maintaining a Buy rating on the stock. Similarly, Bank of America has also set its price target at $250, indicating a bullish outlook for the tech giant.

Bank of America's analysts said in a note that they expect strength in IBM's software segment, particularly driven by improving trends in transaction processing and Red Hat services.

They project revenue and EPS for the third quarter to be approximately $14.9 billion and $2.22, respectively, closely aligning with Street consensus estimates of $15 billion and $2.21, respectively.

The firm noted that while consulting revenues are expected to be flat year-over-year due to a pullback in discretionary projects, the company's consulting business will benefit from backlog conversions and opportunities in generative AI.

With IBM shares up about 40% year-to-date, compared to a 20% increase in the S&P 500 , there is optimism surrounding the company's turnaround efforts, including revenue growth and free cash flow improvements.

BofA said the anticipated new mainframe cycle in 2025 also adds to the positive sentiment.

"Reiterate Buy on continued turnaround (revenue, FCF improvement), defensive portfolio, attractive dividend," stated the bank.

As the company continues to navigate challenges in the consulting space and capitalize on opportunities in software and AI, analysts see IBM as positioned for a solid performance, justifying their high price targets.

Source: Investing.com