Oppenheimer has taken a bullish stance on International Business Machines (IBM), asserting that investors are undervaluing the company’s impending growth opportunities. The investment firm has initiated coverage with an “outperform” rating and a $360 price target, suggesting a potential upside of 24%. Analyst Param Singh highlighted IBM’s transformation towards a software-centric model, projecting that its software portfolio will achieve a 10% compound annual growth rate over the next two years. This optimism stems from the strengths observed in IBM’s automation segment and the accelerating growth from Red Hat, its open-source software subsidiary.
“Our differentiated view is based on IBM’s continued successful pivot to a software-focused company,” Singh stated, adding that he expects IBM’s revenue and margin trajectory to exceed market consensus. He noted that many investors remain conservative about IBM’s ongoing transition, particularly with the company’s stock still being analyzed largely through the lens of its legacy IT hardware and services arms.
Additionally, positive signs have emerged from IBM’s consulting revenue, which saw an uptick in the third quarter of 2025, reflecting a recovery in both applications and business consulting services. Singh anticipates a modest growth for consulting, projecting a compound annual growth rate in the low single digits. “Organizations that previously allocated IT budgets to enhance their AI infrastructure are now keen on leveraging that hardware across AI applications,” he explained, asserting that IBM boasts exceptional engineering talent that positions the company to thrive in application development and management.
Singh also emphasized the potential for increased revenue through the creation and management of artificial intelligence applications. “We believe these drivers will lead to robust growth with existing customers and foster continued gross margin and pre-tax margin expansion,” he added. The analyst expressed confidence that IBM’s stock should ultimately trade at a higher value, aligning more closely with industry averages due to solid growth in its software sector, a rebound in consulting growth, and rising gross and pre-tax margins.
IBM’s shares have already seen a remarkable surge, rallying 32% this year, further underscoring Oppenheimer’s upbeat outlook. As the technology landscape shifts and companies increasingly invest in AI infrastructure, IBM’s strategic pivot could position it favorably, attracting both new and existing investors.
The overall sentiment from Oppenheimer reflects a growing recognition of IBM’s transformation and its promising future, reinforcing the belief that the tech giant is on the path to capitalize on burgeoning growth opportunities within the software and consulting markets.
Original Source: https://www.cnbc.com/2025/11/21/oppenheimer-says-wall-street-is-underappreciating-ibms-transition.html
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Publish Date: 2025-11-21 18:17:00
