International Business Machines, the Technology sector company, was revisited by a Wall Street analyst today. Analyst Erik Woodring from Morgan Stanley maintained a Hold rating on the stock and has a $252.00 price target.
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Erik Woodring has given his Hold rating due to a combination of factors affecting IBM’s performance. Despite IBM posting notable revenue and earnings growth, the software segment, particularly RedHat and TP, has underperformed for the third consecutive quarter, which raises concerns about future revenue growth targets. The organic software growth fell short of both the analyst’s and management’s expectations, and gross margins missed estimates for the first time in twelve quarters.
While there were positive aspects, such as better-than-expected results in Consulting and Infrastructure, the reliance on high software growth to achieve long-term revenue targets presents challenges. The stock’s current valuation appears high, and the need for inorganic growth to meet future revenue goals adds uncertainty. Additionally, potential future technologies like Quantum are not yet reliable enough to form the basis of an investment thesis. These factors contribute to a cautious outlook, leading to a Hold rating with a revised price target.
In another report released today, Jefferies also maintained a Hold rating on the stock with a $300.00 price target.