On Tuesday, Jefferies adjusted its outlook on International Business Machines Corp. (NYSE:IBM), reducing the price target from $215.00 to $210.00, while keeping a Hold rating on the stock. The firm highlighted IBM 's ongoing efforts to revamp its business model with a greater focus on software.
The firm acknowledged IBM's initiatives to enhance its software growth and profitability. These efforts are part of IBM's strategy to transition towards a software-led approach. Despite these positive steps, the firm indicated that IBM needs to improve its go-to-market execution and invest further in its organic growth capabilities to drive long-term software growth.
According to Jefferies, IBM's current valuation, which is around 20 times the estimated GAAP earnings per share for the calendar year 2025, reflects a balanced risk/reward scenario. The firm's stance is based on the need for more evidence of a revitalized software segment within IBM's business before reconsidering the stock's potential.
The price target adjustment by Jefferies comes as IBM seeks to reposition itself in the technology sector. The company has been working on expanding its software portfolio, which is seen as a key component for its future growth and market competitiveness.
Jefferies' new price target of $210.00 for IBM reflects a conservative approach, awaiting further signs of progress in the company's transformation efforts before making any changes to its rating. The Hold rating signifies that the firm advises investors to maintain their current positions in IBM shares at this time.
InvestingPro Insights
International Business Machines Corp. (IBM) has been a cornerstone in the IT Services industry and a longstanding dividend payer, which has raised its dividend for 28 consecutive years. This commitment is reflected in the data, with a solid dividend yield of 3.65% as of the latest update. Moreover, investors may find comfort in IBM's low price volatility, a trait that has been consistent for the stock, suggesting it could be a stable component in a diversified portfolio.
From a valuation standpoint, IBM's P/E Ratio stands at a notable 22.2, with an adjusted P/E Ratio for the last twelve months as of Q4 2023 at 21.16. The company has also experienced a large price uptick over the last six months, with a 36.12% price total return, indicating a strong market performance recently. Additionally, IBM's price is currently at 91.32% of its 52-week high, which may suggest a level of confidence from the market in the company's current and future prospects.
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