IBM (IBM.US) shares soared to record high after receiving Stifel's “buy” rating on the eve of Q3 earnings

The Zhitong Finance App learned that IBM (IBM.US) received Stifel's buying rating on the eve of the upcoming release of the Q3 earnings report. Earlier this week, the stock closed at a record high. Stifel also raised IBM's price target from $205 to $246. Furthermore, although Stifel expects IBM's revenue to be lower than the previous quarter due to seasonal factors, earnings per share may exceed expectations. IBM closed at a record high of $235.26 on Monday and continued to soar on Tuesday, hitting a new intraday high of $237.37.

IBM will announce financial results for the third quarter of 2024 after the market on October 23. Analysts generally expect revenue of $15.06 billion and adjusted earnings per share of $2.22. Last quarter, IBM's earnings per share were $0.26 higher than expected, while revenue was $147 million higher.

Looking ahead to 2025, Stifel believes IBM's recent acquisitions and the new mainframe cycle will increase IBM's revenue.

IBM is expected to complete the $6.4 billion acquisition of HashiCorp (HCP.US) in the fourth quarter of 2024, but regulatory scrutiny may delay the deal until early 2025. On July 1, IBM completed a $2.1 billion transaction to acquire Streamsets and WebMethods from Software AG.

Stifel anticipates that these acquisitions will increase IBM's software division revenue by 4% or more by 2025. The investment agency also believes that IBM will benefit from the renewal of the 2025 corporate license agreement, particularly in the fourth quarter. More importantly, IBM's next mainframe cycle is expected to begin in the first half of 2025.

Stifel analysts led by David Grossman (David Grossman) said in an investor report: “IBM's last mainframe cycle was z16, which was launched in Q2 '22.” “The mainframe cycle usually lasts 10-12 quarters, and we expect the next cycle to begin in the first half of 2025.”

“The segmented reports aren't that detailed,” he added. “Historically, however, the mainframe cycle added about $1.5 billion in revenue to the infrastructure sector in the first 12 months.”

IBM's stock price has soared 67% over the past year, and has repeatedly reached new highs in the past month.