'Not Your Father's IBM' - Analyst Says Company's Shift To A Software-Centric Company Is Overlooked

International Business Machines Corporation IBM shares are trading higher on Tuesday.

Oppenheimer analyst Param Singh initiated coverage on IBM with an Outperform rating and a price forecast of $320.

Per Singh, the tech behemoth will experience sustained double-digit revenue growth in its software portfolio, mainly due to Red Hat offerings.

Red Hat has recently broadened its product offerings through several partner integrations, which could drive high-teens to 20% growth for the segment, surpassing consensus expectations, Singh writes.

Additionally, the analyst highlights that IBM has the opportunity to expand cross-selling once the HashiCorp deal is finalized.

The analyst also sees an inflection in consulting growth in the second half of the year, driven by a recovery in application development and management.

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Additionally, IBM’s potential in AI applications, including Generative AI, provides further growth opportunities.

This combination of factors will lead to stronger expansion with existing customers, improved margins, and a higher stock valuation as company’s software pivot gains recognition, the analyst adds.

The analyst writes that IBM’s successful shift to a software-focused company has been overlooked and forecasts revenue and margin growth to surpass consensus.

The analyst notes the stock is still mainly covered by IT hardware/services analysts.

Price Action: IBM shares are trading higher by 2.2% to $254.75 at last check Tuesday.

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