Bank of America raised its price target on International Business Machines Corp (NYSE:IBM) to $320 from $290, saying the stock could re-rate higher on the back of transformational initiatives, expanding free cash flow, and accelerating revenue growth.
While IBM shares are trading near all-time highs at about 22 times forward enterprise value to free cash flow, BofA analysts argue the valuation is still attractive given the company’s strategic overhaul and positioning in generative and Agentic AI.
“We continue to view IBM as a defensive investment with improving revenue growth, which in turn can drive higher cash flow that could be re-invested for more M&A,” BofA said in a note on Tuesday.
The bank has a “Buy” rating on the stock.
IBM has undergone a major shift in the past five years, BofA noted, by exiting slower-growth segments and doubling down on hybrid cloud, AI, and high-value consulting. The mainframe business has gained renewed relevance by driving growth in software and transaction processing.
On the bullish side, BofA highlighted IBM’s leadership-led transformation, the impact of GenAI and Red Hat, and the multiplier effect of its integrated hardware and consulting offerings. The analysts also pointed to IBM’s potential to benefit from quantum computing over time.
Bears remain skeptical due to lingering concerns over slowing software growth, potential consulting headwinds, and valuation, BofA noted, but the bank sees those concerns outweighed by structural improvements.
“IBM remains structurally under-owned and underweight,” analysts wrote. “Despite past underperformance, we believe the turnaround is taking hold.”
BofA’s new price objective implies a 24x multiple on its 2026 EV/FCF estimate, up from a prior 20x multiple.
Shares of IBM were around 1.2% higher in New York on Wednesday at around $286.50.