On Wednesday, IBM shares closed up 7.1 percent after the hardware, software, and consulting company reported better-than-expected first-quarter results, prompting analysts to raise price targets and estimates. IBM’s gains marked the company’s best day since early April 2020.
The 110-year-old technology company has become more appealing to investors this year as central banks have raised interest rates to combat inflation.
Despite not growing as quickly as many of its enterprise software competitors, it generates income and continues to pay dividends, which can act as a hedge against market uncertainty.
Executives said on Tuesday that hiring new employees will be more expensive in the coming months, but the company plans to charge higher fees for consulting engagements.
It will also release a new mainframe computer, which may aid in growth. Refinitiv polled analysts now expect IBM to grow by 6% in 2022, up from 4% last year.
“We’re incrementally more constructive after two consecutive Q’s of outperformance,” Morgan Stanley analyst Erik Woodring, who has a buy rating on IBM stock, wrote in a client note.
The firm raised its 12-month price target to $157 from $150, and it expects IBM’s revenue to increase by 5% in constant currency in 2022, up from about 4% previously.
Volatility and uncertainty are driving market conditions right now, and because more than half of IBM’s revenue is recurring rather than one-time, it stands to perform better in the current environment than other hardware companies tracked by Morgan Stanley, Woodring wrote. Apple, Dell Technologies, HP Inc., and Xerox are among them.
Bank of America analysts led by Wamsi Mohan, with a buy rating on IBM stock, raised revenue and earnings expectations for 2022, 2023 and 2024. “With the benefits of the Mainframe cycle yet to accrue in 2022/2023, we view the portfolio as defensive (outperforms in a difficult macro environment) and expect sustained revenue growth beyond 2022,” they wrote.
Credit Suisse analysts Sami Badri and George Engroff, who rate IBM stock as a buy, raised their estimates for this year and next year and raised their target price for IBM stock by $1 to $166.
After the report, not everyone felt better about IBM. Toni Sacconaghi Jr. of Bernstein Research, who rates IBM stock as a hold, noted in a note that while IBM raised its full-year expectations “modestly,” margins were narrower than expected, and any move higher could be temporary, because 2023 will be a more difficult year for the company.
For the latest Business News Follow BOL News on Google News. Read more on Latest Business News on oldsite.bolnews.com
