Citi raises IBM price target to $280, maintains Buy rating

Citi analyst Fatima Boolani raised her price target on IBM (NYSE: IBM) to $280 from $245, while maintaining a Buy rating on the stock.

In a note, Boolani cited IBM's revenue growth of 6% year-over-year on a constant currency basis, which beat Street estimates by 3 percentage points, with growth accelerating 5 points sequentially. The performance was led by infrastructure and software segments.

Software revenue grew 9% year-over-year on a constant currency basis, accelerating 4 points quarter-over-quarter. Transaction processing showed a recovery of 10% year-over-year on a constant currency basis. The analyst noted that Automation declined at a low single-digit percentage year-over-year, and that organic software demand "remains challenged."

Boolani noted that approximately two-thirds of second-quarter mainframe deal slippage was recouped, which she described as signaling "franchise stability." She flagged continued infrastructure support deceleration and year-over-year margin declines as potential risks to stock performance.

IBM reaffirmed full-year revenue growth guidance of 4% to 5%, tightened its software revenue range, and raised its free cash flow outlook. The analyst also referenced IBM's Lightwell and Quantum commercialization opportunities as factors supporting her constructive view on the stock.

The consulting segment was noted as a disappointment in the period.

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