International Business Machines Corp. may be hitching to the artificial-intelligence bandwagon with its new WatsonX initiative, but analysts are more interested in areas of Big Blue’s business that are translating into serious revenue in the here and now.
“By segment, Red Hat growth in the second quarter remains an important metric to monitor as management expects Red Hat to contribute ‘about half of the expected 5 points of software growth’ in 2023,” wrote Vogt, who has a sell rating and a $110 price target on IBM’s stock. As companies rush to convince investors of their involvement with AI, IBM has played up its WatsonX enterprise-AI offering, but while JPMorgan analyst Brian Essex was “encouraged” by the product, he’s not expecting a sizable financial role for it in the near term.
“IBM will have a seat at the enterprise AI table given its legacy Watson initiative, increasing security concerns and enterprise positioning,” Grossman said, recommending the stock as a “defensive market hedge” for “dividend-sensitive” investors. He has a buy rating and a $140 price target on the shares.