IBM shares climbed about 9% on Monday after Barclays initiated coverage of the technology company with an Overweight rating, citing the company's evolution into a software-focused business with steady growth prospects and expanding margins.
The brokerage set a $350 price target on the stock, implying roughly 17.5% upside from its May 29 closing price. Barclays said IBM's growing software mix, hybrid cloud strategy and exposure to AI-driven enterprise spending support a favorable long-term outlook.
The brokerage said nearly half of IBM's revenue now comes from software, which generates the majority of its profits and is expected to become an even larger part of the business mix over time. Barclays forecasts mid-single-digit organic revenue growth and continued margin expansion, supported by IBM's portfolio of infrastructure software serving large, regulated customers.
Barclays highlighted IBM's hybrid cloud strategy, centered on Red Hat Enterprise Linux and OpenShift, as a key growth driver. The firm believes enterprises will continue to rely on hybrid environments that combine public cloud, private cloud, and on-premises infrastructure, creating demand for IBM's software stack, automation tools, and data management offerings.
The brokerage also pointed to artificial intelligence as a tailwind for IBM's hybrid cloud, data, and distributed infrastructure businesses. It expects AI adoption to boost demand for IBM's software platforms, including watsonx, data integration tools, and infrastructure products used to run AI workloads close to enterprise data.
Beyond its core software business, Barclays views quantum computing as a significant long-term opportunity. The firm noted IBM's leadership position in quantum computing, including its fleet of cloud-accessible quantum processors and more than $1 billion in quantum-related contracts. While meaningful financial contributions remain years away, Barclays believes IBM's early lead provides valuable optionality for investors.
Barclays values IBM on an enterprise value-to-unlevered free cash flow basis and assigns a 21x CY2027 multiple, arguing that the stock remains attractively valued relative to other large technology peers despite its recent share-price gains.
source https://www.investing.com/news/stock-market-news/ibm-jumps-9-after-barclays-launches-coverage-with-bullish-outlook-4719880
