Zinger Key Points
- IBM could set its medium-term target at mid-single digit revenue growth.
- The focus during the Investor Day is likely to be on Software.
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IBM IBM is scheduled to host its Investor Day on Feb. 4.
The event is likely to be "a positive catalyst for the stock," according to Goldman Sachs.
The IBM Analyst: Analyst James Schneider maintained a Buy rating and price target of $250.
The IBM Thesis: Management is likely to announce its medium-term (2025 to 2027) target reflecting mid-single digit revenue growth, broadly in-line with Street estimates, Schneider said in the note.
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"We expect free cash flow to grow in the high-single-digit range, in excess of revenue growth in this period," he wrote.
The focus at the event would be on IBM's Software revenue targets, given the ongoing improvement in the company's portfolio mix and Red Hat's outperformance, the analyst stated. He added that the company is likely to raise its medium-term target for Software to high-single-digit revenue growth, from its prior guidance of mid-single-digit growth.
"We think the stock could move higher on this guidance if management is able to articulate its overall Software strategy, which is centered around open source and DevOps solutions for large enterprise customers," Schneider further wrote.
IBM Price Action: Shares of IBM had risen by 0.59% to $226.11 at the time of publication on Tuesday.
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