IBM’s Shares Drop Sharply After Q1 Report: Analysts Say It’s Overdone, Revenue Growth To Accelerate – IBM (NYSE:IBM)

IBM IBM shares tanked despite the company Wednesday reporting upbeat first-quarter earnings.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

Analyst Wamsi Mohan maintained a Buy rating and price target of $270.

IBM reported strong quarterly results, with 2% revenue growth in constant currency terms, Mohan said in a note. The company guided to “at least 4% cc growth” in the second quarter and said it expects a further acceleration in the back half to drive mid-single-digit growth, he added.

“The acceleration is driven by the new Mainframe (+1 point to overall growth), M&A impact (+2.5 points to growth), reacceleration in software (+0.5% to growth) with some moderation in Consulting (no contribution to growth),” the analyst wrote. IBM had $3.5 billion in gross savings exiting 2024 and can leverage productivity improvements in case there is a slowdown in the macro environment, he further stated.

Check out other analyst stock ratings.

Analyst James Schneider reiterated a Buy rating and price target of $270.

The sell-off in the stock appears “overdone,” as IBM achieved in-line Software and Consulting revenue and free cash flow performance, despite intensifying macro headwinds, Schneider said. While heightened macro uncertainty may impact margins in parts of IBM’s portfolio, its infrastructure portfolio is “significantly more defensive than peers in the current environment,” he added.

Management reiterated guidance of at least 5% constant currency revenue growth in 2025, with free cash flow of $13.5 billion, which is a positive given that “visibility remains low for the entire industry,” the analyst stated. IBM appears to be on track “to complete its pivot to long-term growth fueled by stronger software growth and market share gains in consulting,” he further wrote.

IBM Price Action: Shares of IBM had declined by 7.51% to $227.08 at the time of publication on Thursday.

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