Here’s what Wall Street is saying about IBM ahead of earnings

IBM (IBM) is scheduled to report results of its fiscal fourth quarter after the market close on January 24, with a conference call scheduled for 5:00 pm ET. What to watch for:

GUIDANCE: Along with its last report, IBM said it anticipated FY23 revenue growth to come in at the low end of its 3%-5% growth view. At the time, analysts were expecting the company to report FY23 revenue of $58.41B, but that figure has since risen to $61.78B. Looking to Q4, Wall Street expects IBM to report earnings per share of $3.78 on revenue of $17.3B.

STIFEL PRICE TARGET: Earlier this week, Stifel analyst David Grossman raised the firm’s price target on IBM to $183 from $144 and kept a Buy rating on the shares. IBM, which had been underperforming, surged two weeks ago coincident with shifting sentiment in the IT Service sector, which accounts for 33% of its revenue, the analyst told investors. The 2024 set-up “appears solid,” said the analyst, who estimates about 4% constant currency revenue growth, or about 3% organic, and EPS of $10.10.

EVERCORE UPGRADE: Last week, Evercore ISI upgraded IBM to Outperform from In Line with a price target of $200, up from $165. The firm thinks that as Enterprises look to deploy AI tools to enhance productivity the process will be “complicated and messy,” arguing that IBM, with their unique set of consulting and software assets, can help solve this bottleneck. The firm thinks IBM is well positioned to benefit from a host of tailwinds in 2024 and beyond driven by a combination of Enterprise IT spend improving to drive productivity and AI centric tailwinds, the analyst tells investors.

JEFFERIES INITIATION: Earlier this month, Jefferies initiated coverage of IBM with a Hold rating and $180 price target. The analyst likes the “transformative moves” IBM has taken to reposition itself as a software-led story, including the Red Hat acquisition, Kyndryl spinoff and investments in artificial intelligence. However, IBM is growing revenue below its software peers while operating at lower margins, the analyst tells investors in a research note. The firm believes the stock can “grind higher,” but thinks upside is capped in the absence of a meaningful acceleration in software.

AI ALLIANCE: In early December, IBM and Meta (META) announced the launch of the AI Alliance in collaboration with over 50 founding members and collaborators globally. “The AI Alliance is action oriented and decidedly international, designed to create opportunities everywhere through a diverse range of institutions that can shape the evolution of AI in ways that better reflect the needs and the complexity of our societies. The AI Alliance is focused on fostering an open community and enabling developers and researchers to accelerate responsible innovation in AI while ensuring scientific rigor, trust, safety, security, diversity and economic competitiveness,” the companies said. The AI Alliance will begin its work with the formation of member-driven working groups across all major topical areas. The Alliance will also establish a governing board and technical oversight committee dedicated to advancing the above project areas, as well as establishing overall project standards and guidelines. Some founding members include AMD (AMD), Dell (DELL), Intel (INTC), Oracle (ORCL), and Sony (SONY).