Bank of America has upgraded its target price for IBM, citing resilient cash flow generation despite temporary margin pressures, signaling renewed investor confidence in the technology giant's long-term fundamentals.
- Bank of America raised IBM’s price target to $220 per share
- IBM generated over $10 billion in free cash flow in fiscal year 2025
- Hybrid cloud revenue grew 7% year-over-year in Q4 2025
- Gross margin declined 120 basis points sequentially due to pricing and investments
- Operating margin held steady at 22.3% amid margin pressure
- IBM’s share buyback program totaled $4.8 billion in the last fiscal year
Bank of America has raised its price target for International Business Machines Corporation (IBM) to $220 per share, reflecting strong conviction in the company’s underlying financial health. The firm highlighted IBM’s continued ability to generate robust operating cash flow, a critical metric for valuation and shareholder returns, even amid near-term challenges in gross margin expansion. Despite macroeconomic headwinds and increased competition in the cloud and AI infrastructure space, IBM’s cash conversion remains a standout feature, with free cash flow exceeding $10 billion in the most recent fiscal year. The upgrade underscores a strategic shift toward long-term value creation, particularly through IBM’s hybrid cloud and AI platforms. The company reported a 7% year-over-year increase in revenue from its hybrid cloud segment in Q4 2025, contributing significantly to recurring revenue streams. While gross margins declined by 120 basis points sequentially due to pricing pressures and investments in AI-driven services, the firm’s operating margin remained stable at 22.3%, demonstrating disciplined cost management. Investors are closely watching IBM's ability to balance innovation with profitability. The $220 target implies a 15% upside from current trading levels, positioning IBM as a potential outperformer in the information technology sector. The move may influence portfolio allocations, especially among value and dividend-oriented investors seeking stable cash flow generators in the tech space. Market participants are also assessing IBM’s share buyback program, which totaled $4.8 billion in the last fiscal year and remains active under the current authorization, supporting shareholder value. The target revision reflects a broader recognition of IBM’s transition from legacy systems to high-growth, software-integrated solutions, reinforcing its relevance in enterprise digital transformation.