IBM Stock Gets a New Bull. Why Its Software Business Is ‘Misunderstood.’

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The price of the software business is low and the stock can be close to 30%, according to the new bull.

RBC Capital Markets initiated coverage on the stock Wednesday with an active rating and a $188 price target, up 28% from Tuesday’s closing price.

Analyst Matthew Swanson said the tech giant’s software business had been “misunderstood and undervalued”, particularly regarding its role in AI and cost optimization. He also mentioned that

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A “special role” in enabling hybrid cloud environments – combining public cloud, private cloud and on-premise infrastructure.

He added that while IBM (ticker: IBM ) now sees about 75 percent of its revenue from software and consulting, investors still view the company “primarily through the lens of hardware and services.” Swanson said the company trades in line with its advisory peers, but at a “significant discount” to its software peers.

“We are confident that its value proposition is well-represented in IBM’s competitive positioning and unique role in the technology ecosystem by consulting and enabling agile digital transformation through software,” Swanson said.

But RBC is less so. According to FactSet data, only 28% of analysts covering the stock have a buy rating, while 67% rate the stock a hold. The average price target is $147.47, or 0.6% higher than Tuesday’s close.

Write to Callum Keown at [email protected]