Tech giant IBM (IBM) appears to be gaining momentum ahead of its first-quarter earnings report, according to investment firm Jefferies (JEF). Specifically, four-star analyst Brent Thill believes that the company is in a good position to beat expectations, particularly in its software business. It is worth noting that over the past year, IBM’s software performance has been uneven, with a mix of beats and misses. However, this time, Jefferies sees a stronger setup.
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Trade IBM with leverageFurthermore, current forecasts may be leaving room for upside. In fact, analysts are expecting around 11% year-over-year software growth, which is lower than the 14% seen in the previous quarter. Because expectations have come down, IBM could have an easier path to beating them. In addition, the earlier closing of the Confluent deal and cautious estimates for Red Hat growth of around 10% could support better results.
Separately, infrastructure and consulting are expected to grow more slowly, thereby leading to total revenue growth of about 7.4% and free cash flow margins near 13%. Nevertheless, Jefferies has a Buy rating on IBM stock and a price target of $320, although this was lowered from $370 due to broader market conditions.
Is IBM a Buy, Sell, or Hold?
Overall, analysts have a Moderate Buy consensus rating on IBM stock based on 11 Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $307.75 per share implies 20.2% upside potential.
