Goldman Sachs has expressed optimism about IBM’s future, with analyst James Schneider initiating coverage with a Buy rating and a price target of $200. The industry is currently experiencing a cyclical correction due to IT spending constraints and a shift in spending priorities toward AI-focused CapEx. However, Schneider believes that Generative AI could actually benefit the IT Services sector in the long run.
Despite the potential benefits of Generative AI, Schneider acknowledged that it may take some time for corporations to realize these advantages due to technical debt. He noted that the market is currently seeing a mix of cyclical and secular risks, presenting a significant opportunity for select companies positioned to gain market share in the shift to Generative AI.
Schneider highlighted that more signs of positive demand momentum may not be evident until early 2025. Investors evaluating IBM and similar companies can consider factors such as dividend yield and stock buyback programs. IBM pays a dividend, yielding 4.24% annually as of June 24, 2024. Additionally, buyback programs, when approved, can support share prices by increasing demand.
By understanding these elements, investors can make informed decisions about whether IBM is a suitable investment option for them. As the market continues to evolve, it is essential for investors to stay informed about industry trends and company-specific developments to navigate the dynamic landscape effectively.
