International Business Machines Corp. (NYSE:IBM) saw its shares rise in pre-market trading after broker RBC Capital upgraded its rating for the tech stock.
The Canadian firm raised its stance on IBM to ‘outperform’ from ‘sector perform’ and upped its stock price target to US$180 from US$160.
In a note to clients, RBC’s analysts said: "A return to gross margin stability coupled with revenue growth in 2018 should set-up the stock for a year of outperformance especially considering the depressed valuation."
They said the key drivers include the mainframe computing cycle, which should drive hardware and software sales, while currency is also expected to become a tailwind and not a headwind in the year.
The analysts added that the trend toward hybrid IT spend is expected to improve and the stock's valuation looks attractive-especially given its 3% plus dividend yield.
In pre-market trading in New York, IBM shares were 1.4% higher at US$156.44.