On Thursday, BMO Capital Markets updated their outlook on IBM (NYSE:IBM) shares, raising the price target to $260 from the previous $235 while maintaining a Market Perform rating. The adjustment follows IBM's latest quarterly financial report which revealed a mixed performance, characterized by a revenue shortfall stemming from weaker than expected results in its Consulting and Infrastructure segments.
The firm noted that despite the revenue miss, IBM's Software division showed resilience, buoyed by recent mergers and acquisitions. The analyst from BMO Capital highlighted the ongoing solid growth in software, which is likely to continue into fiscal year 2025 (FY25), partly due to the potential integration of HashiCorp (NASDAQ:HCP), a software company specializing in cloud infrastructure automation.
BMO Capital also pointed out IBM's promising free cash flow (FCF) growth potential for FY25. This optimism is partly based on the company's ability to expand its margins, a process that can be aided by a strategic mix of its business operations. The firm's stance reflects a positive bias towards IBM's financial prospects, particularly looking ahead to FY25.
In their commentary, BMO Capital stated, "We thought IBM's quarter was mixed with a miss on revenues due to weakness in Consulting and Infrastructure. However, Software growth remains solid, aided by recent M&A deals, and has encouraging growth prospects in FY25 with the potential addition of HashiCorp."
The firm reiterated its Market Perform rating but expressed confidence in IBM's future, especially considering the potential for solid financial performance in the coming years.
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