Oppenheimer recently expressed optimism about International Business Machines (IBM) and its renewed focus on software products, suggesting the market hasn’t fully recognized the value of this strategic shift. The investment firm has initiated coverage of IBM with an “outperform” rating. Analyst Param Singh has set a price target of $320, which suggests a potential upside of around 28% from where the stock closed on Monday. Over the past year, IBM’s shares have already climbed 34%, but Singh is confident that as the company’s pivot to software becomes more evident, its valuation will naturally increase.
Singh pointed out that many investors seem to have overlooked IBM’s strategic shift, continuing to assess the stock through the lens of IT hardware and services analysts. He argues for a reevaluation, suggesting IBM should be valued more in line with its peers, given its software growth, improvements in consulting, and expanding gross and pre-tax margins.
Particularly noteworthy are IBM’s software portfolio and its increasing consulting revenues. The company’s new AI-driven Red Hat products, along with related consulting services, are set to capitalize on the broader AI deployment trends. Singh is bullish, predicting sustained double-digit revenue growth for IBM’s software, primarily fueled by Red Hat. Consulting growth is expected to pick up by the second half of 2025, with a recovery in application development and management paving the way. Furthermore, IBM’s ability to create and manage various AI applications, including generative AI, adds another layer of potential success.
These elements, according to Singh, will lead to significant expansion activities with existing clients, boosting both gross and pre-tax margins. The sentiment among analysts covering IBM is largely positive: LSEG data reveals that out of 21 analysts, 10 rate it a buy, while another eight suggest holding the stock.
