International Business Machines Corporation IBM shares are trading higher on Tuesday.
Oppenheimer analyst Param Singh initiated coverage on IBM with an Outperform rating and a price forecast of $320.
Per Singh, the tech behemoth will experience sustained double-digit revenue growth in its software portfolio, mainly due to Red Hat offerings.
Red Hat has recently broadened its product offerings through several partner integrations, which could drive high-teens to 20% growth for the segment, surpassing consensus expectations, Singh writes.
Additionally, the analyst highlights that IBM has the opportunity to expand cross-selling once the HashiCorp deal is finalized.
The analyst also sees an inflection in consulting growth in the second half of the year, driven by a recovery in application development and management.
Additionally, IBM’s potential in AI applications, including Generative AI, provides further growth opportunities.
This combination of factors will lead to stronger expansion with existing customers, improved margins, and a higher stock valuation as company’s software pivot gains recognition, the analyst adds.
The analyst writes that IBM’s successful shift to a software-focused company has been overlooked and forecasts revenue and margin growth to surpass consensus.
The analyst notes the stock is still mainly covered by IT hardware/services analysts.
Price Action: IBM shares are trading higher by 2.2% to $254.75 at last check Tuesday.
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Overview Rating:
Speculative
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