IBM Could Grow Market Share as AI Investments Pay Off, Goldman Sachs Says

IBM (IBM) shares gained 1.5% Monday after Goldman Sachs analysts initiated coverage with a “buy” rating, citing the software, hardware, and services company’s efforts to move toward long-term growth and investments in artificial intelligence (AI). Goldman also gave a price target of $200, 14% above Monday’s closing price. 

The analysts said IBM was “on a path to successfully complete its pivot to long-term growth.” They pointed to an improving mix of infrastructure software focused on open-source and AI offerings, and a “uniquely complementary consulting business which we believe is decisively gaining market share.”

AI Investments Paying Off

The Goldman Sach analysts said that IBM was “in the middle innings” of its portfolio shift to a suite of modernized application and infrastructure software and a broader array of services, and is moving away from a legacy-focused business model.

They noted that IBM’s “organic investments in AI offerings (WatsonX) have finally begun to pay dividends, and we think its integrated software/service offerings and use of open-source LLMs are a compelling differentiator that provide a competitive edge in client engagements.”

The analysts added that they think the stock “can continue to re-rate higher,” on an improving software business mix, and as the company shows consistent financial performance. They said they anticipate IBM sustaining 5% to 7% long-term revenue growth, and about a 10% increase in free cash flow.

Shares of IBM closed 1.5% higher at $175.01 Monday and have gained about 7% so far in 2024.