IBM's Moment Of Truth As Earnings Expected To Impress With Strong AI Influence, Analyst Says

International Business Machines Corp IBM, will be reporting its first-quarter earnings on Wednesday. Wall Street expects $1.59 in EPS and $14.6 billion in revenues as the company reports after market hours.

IBM stock is up over 45% in the past year, and has risen 11.75% YTD. IBM stock is being propelled by its rapid product deployment, focused attention on AI, and robust cash flows.

As investors prepare for IBM’s upcoming earnings report, insights from BofA Securities shed light on the company’s trajectory and potential.

The IBM Analyst

BofA Securities’ analyst Wamsi Mohan maintains a Buy rating on IBM, with a price target of $220, suggesting 20.9% upside from the current price of $181.90.

The IBM Investment Thesis Ahead Of Q1 Earnings

Mohan emphasizes IBM’s defensive investment appeal, highlighting its substantial exposure to recurring sales, robust cost-cutting strategies, and solid balance sheet.

IBM’s Continued Turnaround

Additionally, Mohan anticipates IBM’s potential for share gains and stable margins, particularly in light of its focus on enterprise AI adoption and software growth. “Longer term, we expect IBM to take share in IT spending with its Cloud and AI initiatives,” said Mohan.

Related: IBM Will Expand Its Cloud Operations In Canada With Launch Of New Cloud Multizone Region To Open In Montreal, Quebec

Mohan underscores the significance of IBM’s consulting segment, especially amidst softness in the consulting industry. Despite challenges faced by peers like Accenture PLC ACN, he remains optimistic about IBM’s signings momentum and expects the company to maintain its guidance for the year.

Mohan also anticipates IBM’s continued turnaround, driven by revenue growth and improvement in free cash flow.

AI Adoption At IBM

In terms of enterprise AI adoption, Mohan highlights IBM’s significant book of business related to GenAI, expecting further growth in this area. He anticipates updates on enterprise AI proof of concepts and pipeline insights in the upcoming earnings report.

Looking ahead, Mohan maintains his expectation of strong free cash flow of around $12 billion in 2024, driven by higher profitability and strategic adjustments in cash requirements.

IBM Price Action: Shares of IBM finished 0.16% higher at $182.19 on Tuesday.

Read Next: Can Magnificent 7 Help Script Market Turnaround? Earnings Pick Up Pace With Microsoft, Meta, Alphabet And Tesla Expected This Week

Photo: Shutterstock