IBM (NYSE: IBM) is evolving into a successful turnaround story under the leadership of Arvind Krishna, says Wamsi Mohan – a senior analyst at the Bank of America Securities.
Krishna is “changing the company’s growth profile” by unloading its dormant assets and replacing them with ones that are now meaningfully contributing to financial strength, he told CNBC in an interview today.
According to the BofA analyst, the post-earnings decline in IBM stock offers a “really compelling opportunity” to build a position in a quality name at a material discount.
Why is BofA bullish on IBM stock?
IBM came in handily above Street estimates in its fiscal Q1 and stuck by its guidance for the full year despite an increasingly challenging macroeconomic environment.
IBM shares have been under pressure, with part of the weakness attributed to skepticism over the company’s ability to meet its 2025 guidance.
Management has projected more than 5% revenue growth on a constant currency basis, but investors appear increasingly doubtful about the feasibility of that target amid persistent macroeconomic headwinds and execution risks.
But the Bank of America analyst remains convinced that IBM’s recently closed $6.4 billion acquisition of HashiCorp will be a significant driver of growth moving forward.
Mohan expects IBM to meet its full-year target given “it’s in a mainframe launch year – and the mainframe is still very relevant.”
Trump tariffs aren’t a threat to IBM shares
BofA’s Mohan currently sees upside in IBM stock to $270, which indicates potential for about a 20% gain from current levels, also because it’s a “big tariff winner”.
The only hardware product that contributes meaningfully to IBM’s top line is the mainframe – and “a lot of that is actually manufactured here in the US,” he argued this morning on “Squawk Box”.
Additionally, the analyst expects Q1 weakness on the software side to prove “transitory” as well.
Wamsi Mohan recommends loading up on IBM on the post-earnings dip also because it’s a dividend stock that currently yields 2.91%, which makes it all the more attractive to own against the wildly uncertain macro environment in 2025.
IBM is dubbed a defensive stock amidst macro uncertainty
IBM is laser focused on generating more cash flow to spend on mergers and acquisitions to further improve its growth profile.
On Thursday, the Bank of America analyst even dubbed IBM a “defensive stock” in his CNBC interview, citing its “recurring revenue and the dividend yield.”
All in all, IBM is “heading into a very strong product cycle” that could help drive significant upside in its stock price this year, he concluded.
Other Wall Street analysts agree with BofA’s Mohan on IBM shares. The consensus rating on the tech stock currently sits at “overweight” with the mean target of $254, indicating potential upside of nearly 13% from here.
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