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The Bull Case For International Business Machines (IBM) Could Change Following Jefferies’ AI-Focused Upgrade – Learn Why

Simply Wall St · 3d ago
  • In recent days, Jefferies upgraded IBM to Buy and highlighted the company’s push into hybrid cloud, AI, and software through acquisitions including HashiCorp and the pending Confluent deal, while other brokers reiterated positive views following improved September-quarter results.
  • Together with IBM’s quantum computing ambitions and its partnership with Anthropic to embed Claude into its software portfolio, these moves underline how the company is trying to reposition itself as a software- and AI-centric provider rather than a legacy hardware vendor.
  • We’ll now examine how Jefferies’ upgrade, centered on IBM’s software momentum and merger benefits, may influence the company’s existing investment narrative.

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International Business Machines Investment Narrative Recap

To own IBM today, you need to believe its shift toward hybrid cloud, AI and higher margin software can offset pressures in legacy and consulting-driven areas. Short term, the key catalyst is the upcoming January 28 earnings call, where investors will focus on software growth and AI traction; the Jefferies upgrade and Confluent progress reinforce that lens, but do not materially change near term macro and consumption-related risks.

Among the recent developments, Jefferies’ upgrade tied to IBM’s software momentum and deals like HashiCorp and the pending Confluent acquisition looks most relevant. It directly connects to expectations that Red Hat, AI offerings such as watsonx, and integration of new platforms can support more recurring software revenue, which many investors are watching closely ahead of those earnings and any commentary on consumption trends.

Yet behind the optimism around AI and software, investors should be aware of the risk that elevated debt from acquisitions could eventually constrain...

Read the full narrative on International Business Machines (it's free!)

International Business Machines’ narrative projects $74.4 billion revenue and $10.5 billion earnings by 2028. This requires 5.1% yearly revenue growth and a $4.6 billion earnings increase from $5.9 billion today.

Uncover how International Business Machines' forecasts yield a $293.89 fair value, a 3% downside to its current price.

Exploring Other Perspectives

IBM 1-Year Stock Price Chart
IBM 1-Year Stock Price Chart

Some of the most optimistic analysts were already assuming IBM could reach about US$76.6 billion in revenue and US$12.1 billion in earnings by 2028, so if you see Jefferies’ upgrade and the Confluent deal as evidence that IBM can overcome legacy revenue and debt concerns faster than consensus expects, you may view the upside as larger, but it is worth remembering that others see these same issues very differently and that both views could shift as the new AI and software news is absorbed.

Explore 16 other fair value estimates on International Business Machines - why the stock might be worth 35% less than the current price!

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.