Investing.com — Bank of America on Thursday hiked its price target for IBM (NYSE:IBM) shares to $260 from $250, maintaining a Buy rating.
This revision comes ahead of IBM’s earnings report on Jan 29. and the Investor Day on Feb. 4, where the company is expected to update its mid-term targets.
BofA’s projections for IBM’s Q4 results are slightly below Wall Street’s expectations, with revenue estimated at $17.5 billion and earnings per share (EPS) at $3.71, compared to the consensus of $17.6 billion and $3.80, respectively.
For the first quarter of fiscal year 2025, BofA’s revenue forecast aligns with the consensus at $14.6 billion, but they predict a higher EPS of $1.66 versus the Street’s $1.57.
Looking further ahead, they expect IBM’s full-year 2025 revenue to grow by approximately 7% in constant currency, outpacing the Street’s forecast of 4.5%.
They also anticipate free cash flow (excluding financing receivables) to be between $12.5 billion and $13 billion, against the consensus of $12.6 billion, while factoring in foreign exchange (FX) headwinds of 150 to 200 basis points.
At its February 4 Investor Day, BofA expects IBM to update mid-term targets. It projects a 6-8% compound annual growth rate (CAGR) for revenue from 2024 to 2027, with the Software (ETR:SOWGn) segment expected to see a high single-digit percentage CAGR.
For Consulting, the bank projects growth in the mid-single-digit percentage range, while for Infrastructure, it anticipates a CAGR of 1%.
Analysts also expect the Consulting segment to recover in the second half of 2025 after a weak first half, while the Infrastructure segment is projected to grow 6% in fiscal 2025, driven by the new Z17 mainframe cycle starting mid-year.
IBM’s progress in the Software segment remains closely monitored too, particularly the performance of Red Hat and the potential impact of recent acquisitions, such as HashiCorp (NASDAQ:HCP) and Neural Magic, on the company’s AI strategy.
“If the HashiCorp. transaction closes, we expect some preliminary thoughts regarding potential synergies and an overview of how it will align within their Software segment,” analysts led by Wamsi Mohan wrote in a note.
