Bank of America resets IBM price target before earnings

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IBM (IBM) has gained astir 2.35% twelvemonth to date, astatine the clip of writing, Wednesday afternoon, Jan. 14. Meanwhile, SPY is up 1.74% successful the aforesaid period. Not a atrocious commencement to the twelvemonth for IBM.

The institution has announced a preliminary merchandise day for its Q4 2025 net study of January 28. After beating the S&P 500 by gaining astir 39% successful the past twelvemonth compared to SPY’s 19% gain, investors indispensable beryllium wondering if the institution volition bash it again, and what we tin expect from IBM successful 2026.

Bank of America expert Wamsi Mohan and his squad updated their opinions connected IBM banal up of the company's earnings.

<em>Bank of America reiterated a bargain standing for IBM stock, raising the people price.</em>Image source&colon; Shutterstock

Analysts said they don’t expect IBM banal to person arsenic beardown maturation successful fiscal 2026 arsenic it did successful 2025, arsenic it volition look respective headwinds. They estimation a softer Q4 pre-tax income (PTI) borderline owed to workforce rebalancing initiatives, which volition pb to fiscal twelvemonth 2025 PTI borderline enlargement beneath the guidance of much than 100 ground points.

The squad believes IBM volition incur a workforce rebalancing disbursal of $400 cardinal successful Q4, resulting successful 70 ground points of fiscal twelvemonth 2025 year-over-year PTI borderline expansion.

Mohan stated that for escaped currency travel (FCF), helium estimates $14.0 cardinal for fiscal twelvemonth 2025 and expects guidance of astir $15 cardinal successful fiscal twelvemonth 2026, maintaining a 130% nett income/FCF ratio.

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Analysts changed their estimates for gross and non-GAAP EPS for fiscal twelvemonth 2025, expanding gross from $66.9 cardinal to $67.1 cardinal and lowering the non-GAAP EPS estimation from $11.38 to $11.32.

In a probe enactment shared with me, Mohan reiterated a bargain standing for IBM stock, and raised the people terms from $315 to $335, based connected 23 aggregate his estimation for the endeavor worth to FCF ratio for calendar twelvemonth 2027.

He wrote: “Our people aggregate for IBM exceeds the precocious extremity of the humanities scope 8-22x, with median 13x. We judge a aggregate astatine the precocious end/exceeding the humanities scope is justified fixed the company’s improving maturation and FCF trajectory with Red Hat.”

The past clip Mohan raised the terms for IBM banal was aft its Q3 net report. For a reminder, work my nonfiction “Bank of America revamps IBM banal terms aft earnings.”