IBM Up on RBC Upgrade, Called ‘Very Attractive’

The shares of International Business Machines Corp. (IBM) gained 2.1% on Thursday afternoon after rising almost 3% in the most recent trading session with a bullish road research report. RBC Capital Markets analysts said the legacy tech giant will make a strong comeback after a difficult year in 2017 and the stock is still undervalued.

Amit Daryanani of the RBC raised his rating to IBM to outperform sector performance, pointing to the stock's favorable valuation. The analyst pointed out that the company, based in Armonk, North Carolina, is trading at 11 times its price-earnings ratio, with a dividend yield of 3%, which is "very attractive".

Revenue Growth Sets Up a Year of Outperformance
"We believe that IBM is a smart capitalization action for savers in 2018 because the revenue potential and margin consistency should allow a new classification," Daryanani wrote in a note to consumers on Wednesday. "A return to the constancy of the gross margin, together with the development of the income in 2018, should start the activities for a year of superior presentation, especially taking into account the depressed valuation"

Last year, IBM saw its shares fall 8% compared to 19% for the S & P 500 in the same period. While the company struggled to impress investors with its turnaround led by Chief Executive Officer (CEO) Ginni Rometty, acclaimed billionaire Warren Buffet eliminated almost a third of his IBM stock.

The RBC analyst raised its 12-month target price for IBM from $ 160 to $ 180, reflecting an increase of approximately 11.3% from Wednesday afternoon to $ 161.73. "IBM represents the best combination of technology businesses in the business segment," said Daryanani. "We believe that IBM has cultivated the pre-eminent technology portfolio."

RBC cited IBM's "new mainframe cycle" for its System Z machines and the increase in hybrid IT spending as drivers of Tech-Titan's positive growth in the New Year.