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IBM Stock: Analysts’ Recommendations

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Analysts’ recommendations

As of October 9, the analysts from different brokerage firms that track IBM (IBM) stock provided ratings. Of the 24 analysts covering the stock, nine recommended a “buy,” 12 recommended a “hold,” and two recommended a “sell.” One analyst provided an “overweight” recommendation.

In the graph above, you can see analysts’ ratings. There weren’t any “underweight” recommendations on the stock.

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Average target price

The average target price for IBM provided by 24 analysts came in at $163.77 as of October 9. The company’s closing price was $147.24 on the same date. In the past week, the stock fell 1.44%.

Valuation

On October 9, IBM was trading at a forward EV-to-EBITDA multiple of ~8.58x. In contrast, Microsoft, Oracle, and Accenture had forward EV-to-EBITDA multiples of ~14.6x, ~10.8x, and ~15.1x, respectively.

Analysts’ opinions

Most of the analysts remain neutral on IBM stock due to the slow success of its Cognitive business unit, which includes key innovative technologies like Watson AI, blockchain, and analytics. In the last five years, IBM maintained average research and development expenses of ~$5.6 billion each year to drive its patent portfolio. However, the performance of IBM’s Cognitive segment is taking time to increase. In the second quarter, the segment’s revenues grew 0.9% YoY (year-over-year). In the last five quarters, the revenues increased at a compound annual growth rate of 0.2%.

In the past year, IBM’s stock price showed slow growth momentum. During this period, IBM’s stock price only increased 1.57%. In contrast, Microsoft (MSFT), Cisco (CSCO), and Accenture (ACN) generated returns of 47.6%, 43.3%, and 25.7%, respectively, in the past year.

However, IBM’s strong capital return policy and lower valuations compared to its peers make the stock look attractive. IBM maintains one of the highest dividend yields of 4.21% in the tech industry.

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