IBM stock pace biggest gain over 20 years underappreciated AI drive higher analysts say

Evercore says 'Big Blue is back.' But not everyone is convinced. IBM's stock jumped 11.2% higher after strong forecast.

Evercore says 'Big Blue is back.' But not everyone is convinced

IBM has been overlooked in the AI conversation, but analysts are saying that investors should be paying attention to the potential for growth in International Business Machines Corp. After a strong forecast and better-than-expected free cash flow for this year, some analysts are convinced that IBM's stock is on the rise. The company's fourth-quarter profit exceeded expectations, and its stock jumped 11.2% higher, putting it on pace for its highest close since 2013.

Analysts at BofA and Evercore ISI raised their price targets on the stock, citing IBM's "defensive portfolio, attractive dividend yield, and underappreciated AI portfolio." They believe that IBM remains an underappreciated AI beneficiary that will continue to work higher over the next few years.

Despite the positive outlook, not everyone is convinced. UBS analysts have a sell rating on IBM's stock and believe that the free-cash-flow forecast overshadows potentially soft growth for the year ahead. They argue that IBM's portfolio only supports around 2.5% organic growth in 2024, and that the company's book of business for AI does not reflect near-term sales.

IBM's Chief Executive, Arvind Krishna, remains optimistic about the company's future, stating that business trends this year would be similar to last year. He believes that companies will increasingly need help from IBM in picking large language models, prepping data, creating apps, and monitoring performance.

While some analysts are bullish on IBM's prospects, others remain skeptical. They argue that the company's AI portfolio may be more bark than bite in 2024, and that IBM's full-year revenue outlook for single-digit growth does not align with the market's perception of the company as a material beneficiary from AI.

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