IBM’s
software business is undervalued and the stock could climb close to 30%, according to its newest bull.
RBC Capital Markets initiated coverage on the stock Wednesday with an Outperform rating and a price target of $188, implying a 28% upside to Tuesday’s closing price.
Analyst Matthew Swanson said the tech giant’s software business was “misunderstood and undervalued,” particularly when it comes to its role in AI and spend optimization. It also cited
IBM’s
“unique role” in enabling hybrid cloud environments—combining public cloud, private cloud, and on-premises infrastructure.
He added that while IBM (ticker: IBM) now sees 75% of revenue coming from software and consulting, investors still view the company “largely from its hardware and services lens.” Swanson said the company trades in line with consulting peers but at a “significant discount” to software peers.
“We’re optimistic on the competitive positioning and unique role that IBM plays in the tech ecosystem with its value proposition best represented by enabling efficient digital transformation through consulting and software,” Swanson said.
RBC is in the minority, however. Just 28% of analysts covering the stock have a Buy rating, with 67% rating the shares Hold, according to FactSet data. The average price target is $147.47, or 0.6% higher than its Tuesday closing price.
Write to Callum Keown at callum.keown@barrons.com
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