IBM (NYSE: IBM) shares rose on Wednesday after the IT giant posted better-than-expected earnings and issued guidance that topped Wall Street estimates.
Armonk, New York-based IBM said it earned $ 1.40 per share on $ 14.2 billion for the first quarter, topping estimates of $ 1.39 per share and $ 13.84 billion in sales.
IBM (IBM) said it expects sales this year “the high end of the mid-single digit range,” but did not offer an exact figure. Wall Street analysts have forecast IBM (IBM) to report revenue of almost $ 61 billion for the year.
IBM (IBM) shares rose nearly 7% to $ 138.20 on heavy volume.
As a result of the earnings beat, Bank of America analyst Wamsi Mohan raised his price target slightly, to $ 165, from $ 162.
“Sustainable revenue growth has been historically elusive for IBM but the company has made significant progress on portfolio changes and in our opinion, revenue outperformance while maintaining Free Cash Flow is a material positive change in trajectory,” Mohan wrote in a note to clients.
The analyst added that the benefits of the mainframe cycle will start to accrue later this year and in 2023, and as such, IBM’s (IBM) portfolio is “defensive,” with the analyst expecting “sustained revenue growth beyond 2022.”
Credit Suisse analyst Sami Badri also raised his firm’s price target, going to $ 166 from $ 165 and reiterated the firm’s outperform rating, noting that IBM (IBM) is helping facilitate the transition to hybrid cloud architecture, which should benefit the company.
“As a hybrid-first world progresses and materializes further for enterprise accounts, we view IBM as one of the key strategic enablers of such an IT architecture transformation,” Badri wrote in a note to clients.
Last week, Morgan Stanley upgraded IBM (IBM) to overweight, with the firm noting the company is in a strong position to outperform other high-end tech software and services providers this year.