Evercore ISI Adds IBM (IBM) to Tactical Outperform List

Evercore ISI analyst Amit Daryanani reiterated an Outperform rating and $215.00 price target on IBM (NYSE: IBM)

The analyst comments "We are adding IBM to our Tactical OP list ahead of their Jun-qtr results announcement on Wednesday July 24 after market close. Our call is based on improving fundamentals (RHT and Consulting) combined with muted stock price performance vs. the market (flattish vs. +11% since IBM last reported EPS on 4/24) which suggests expectations could be tempered. We expect the company to report moderate upside vs. consensus revenue/EPS estimates ($15.6B/$2.18). Our sense is that, while the enterprise IT spending backdrop remains cautious (excluding AI), we think a combination of RHT acceleration (share gains due to disruption at competitors), improving Consulting fundamentals (ACN revenue trajectory inflecting), and initial AI momentum (both ACN and BCG have called out AI contribution) to drive better than expected results and improving trends for the balance of CY24. For the fully year (2024), we expect guidance calling for mid-single digit revenue growth and $12B in FCF to remain unchanged. Key focus items investors on the upcoming earnings call include: 1) AI: Bookings and/or revenue metrics and expectations for overall contribution to CY24. 2) RHT Performance/Outlook: Trajectory of RHT business - progress toward reacceleration toward double-digits and competitive dynamics. 3) Consulting Inflection: Will IBM's consulting growth reaccelerate given ACN's improving performance? 4) FCF: Progress toward $12B outlook. 5) QRadar Sale to PANW: Implications from sale of QRadar to PANW on Software revenue and potential for Consulting benefit. Net/net: We think IBM is well-positioned to sustain mid-single digit sales growth driven by a combination of secular growth in consulting, improved execution and price increase benefits on software side. Crucially, we think AI benefits will start to accrue and be more material in CY25 and beyond. Maintain OP rating and $215 target."

For an analyst ratings summary and ratings history on IBM click here. For more ratings news on IBM click here.

Shares of IBM closed at $182.88 yesterday.

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