IBM Shares Up 7%, Analysts Raise Rating Following Impressive Q1 Earnings

UTC by Steve Muchoki · 3 min read
IBM Shares Up 7%, Analysts Raise Rating Following Impressive Q1 Earnings
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Analysts polled by Refinitiv now see IBM growing 6 percent in 2022, up from under 4 percent last year.

International Business Machines Corp (NYSE: IBM)  shares have gained 7.10% on Wednesday to close the day trading at $138.32. After IBM managed to beat analysts’ expectations in Q1 earnings results, a survey conducted by Refinitiv now shows analysts are more bullish than before.

Reportedly, analysts polled by Refinitiv now see IBM growing 6 percent in 2022, up from under 4 percent last year.

The company is a favorite among investors seeking the dividends paid out. Moreover, the company offers a better hedge against volatility.

Notably, the company has been decentralizing its business unit to enable fast growth. Remember that Kyndryl Holdings Inc. (NYSE: KD), an IBM spin-off, is independently operating on its own. Initially, Kyndryl made up the bulk of IBM Global Technology Services.

Analysts’ Forward-Looking Statement on IBM

According to a poll conducted by Refinitiv, most analysts from renowned financial institutions are bullish on IBM shares. Nevertheless, some are skeptical of a possible breakout after years of consolidation.

Worth noting, IBM shares have consolidated in the same range for the past five years, according to data provided by TradingView. For the past five years, the shares have declined approximately 9.71 percent. Nonetheless, they are up approximately 874.35 percent from the all-time record.

Morgan Stanley analyst Erik Woodring said the firm’s 12-month price target moved to $157 from $150. Additionally, the bank expects IBM’s revenue to grow by 5 percent in constant currency in 2022, compared with about 4 percent growth earlier.

“We’re incrementally more constructive after two consecutive Q’s of outperformance,” Woodring told clients.

Of importance, Morgan Stanley has a Buy rating for the IBM shares.

On another hand, analysts from the Bank of America led by Wamsi Mohan raised revenue and earnings expectations for 2022, 2023 and 2024. Similarly, the Bank has a Buy rating on the IBM stock market.

“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,” Bank of America noted.

Credit Suisse analysts Sami Badri and George Engroff raised their estimates for this year and next year. Additionally, they increased their price target by $1 to $166. Also, Credit Suisse has a Buy rating on the IBM stocks.

Not all analysts are, however, optimistic with IBM’s future growth prospects. Toni Sacconaghi Jr. of Bernstein Research mentioned in a note that while IBM raised its full-year expectations “modestly,” margins were narrower than expected. He added that any move higher could be temporary because 2023 will be a more difficult year for the company.

Notably, Sacconaghi has a Hold rating on the IBM stock market.

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Steve Muchoki

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