Shares of IBM (IBM.N), which opens in a new tab, surged by over 13% to a level not seen in over a decade on Thursday following the business’s announcement of a stronger-than-expected revenue forecast supported by robust demand for its AI services.
The generative AI business at IBM, which includes bookings along with sales from services like Watsonx, had a doubling of orders in the fourth quarter and is projected to contribute to a 4%-6% increase in revenue for the firm in 2024, according to a report released late on Wednesday.
According to IBM:
IBM CFO James Kavanaugh informed Reuters that a significant portion of IBM’s AI-related bookings come from consulting firms and software companies, such as SAP SE (SAPG.DE) in Germany.
The market value of IBM increased by over $20 billion as shares reached a high of $196.89, their greatest level since June 2013. With a current gain of almost 11%, the stock is poised to achieve its highest daily percentage gain after March 2020.
In the wake of the news, eight Wall Street analysts, including those from Evercore, JPMorgan, Bank of America, and JPMorgan, increased their price estimates for IBM shares.
According to LSEG data, the average recommendation from the 20 analysts that cover IBM is “hold,” and their median price target is $144.50, which hasn’t changed from an earlier report. According to LSEG data, IBM’s competitors were trading at around 20 times the predicted profits for the next 12 months, while the stock is trading at approximately 17 times, which is higher than the 2-year historical average of roughly 14 times.
The team of analysts at JPMorgan, led by Brian Essex, increased their price target for the stock from $170 to $190 in a note to investors. They stated that they do not believe that IBM has seen the valuation benefit that some of its technology peers have experienced as a result of artificial intelligence “Because recent multiple expansion has trended generally below the primary comparisons that we look to for valuation. “