On January 13, BofA Securities analyst Wamsi Mohan raised the price target for International Business Machines Corporation (NYSE: IBM) to $335.00 from $315.00. The firm maintained a Buy rating on the stock.
Analysts at the firm see a robust free cash flow outlook for IBM, along with a higher-margin software mix. They believe this will offset near-term headwinds.
Following a robust year in 2025, firm analysts expect IBM to have a more modest year. This is due to a weaker close to F25 and several headwinds in F26.
Analysts anticipate softer pre-tax income margin driven by workforce rebalancing initiatives. IBM is scheduled to report on F4Q25 on January 28th.
BofA estimates a workforce rebalancing expense of $400 million in the fourth quarter. This is expected to limit full-year 2025 PTI margin expansion to about 70 basis points, which is below management guidance of 100 basis points. The firm also anticipates lower taxes to be a partial offset to earnings per share.
The firm anticipates about 5% revenue growth in 2026. This growth is expected to be led by robust software growth and modest infrastructure growth.
Meanwhile, the Confluent deal could add to software revenue in 2026, though it is likely to be modestly earnings dilutive.
"For F26, IBM likely guides SW cc rev growth of ~10%, LSD% cc in Consulting, and flat cc in Infra totaling 5% cc growth for IBM (organic ~4%)," said the analyst. "CFLT is projected to close mid-year, and we assume +2% inorganic rev growth contribution to SW. We adjust our F26 numbers to reflect dilution of ~$0.40 with a minimal impact on FCF. For FCF, we model $14.0bn for F25 and expect a guide of ~$15bn in F26, maintaining 130% NI/FCF ratio. Overall, we are cautious on 4Q given workforce rebalancing and lower growth in SW. Reit. Buy on higher margin SW revs, strong FCF growth, and optionality from QC."
International Business Machines Corporation is a multinational technology company and a pioneer in artificial intelligence.