TLDR
- Susquehanna initiates IBM coverage at Neutral with a $303 price target, implying ~2.5% upside from ~$295
- Analyst values IBM’s quantum-computing division at $65 per share, seeing it as a play on a $650B market by 2040
- AI-assisted COBOL modernization is seen as a threat to IBM’s high-margin mainframe and consulting business
- IBM’s latest earnings beat expectations: EPS of $1.91 vs $1.81 estimate, revenue of $15.92B vs $15.60B expected
- Starbucks building its own AI tools to replace IBM software adds to near-term headwinds
IBM stock is trading around $294.79, sitting just shy of its 12-month high of $332.46, after a 25% rally in Q2 brought it close to record territory.
International Business Machines Corporation, IBM
Susquehanna analyst James Friedman kicked off coverage on International Business Machines Friday with a Neutral rating and a $303 price target. That implies about 2.5% upside from current levels — not exactly a ringing endorsement, but not a sell either.
Friedman’s note can be summed up simply: there’s a lot to like about IBM, just not enough to buy it right now.
The analyst is genuinely enthusiastic about IBM’s quantum-computing unit. He values it at $65 per share — a rare move for an analyst to put a specific dollar figure on a division. He sees IBM capturing a large slice of a $650 billion quantum market by 2040, calling it “a great way to participate.”
IBM has a 12-month low of $212.34 and currently carries a market cap of $277 billion. The stock has lagged the S&P 500 in 2026, down less than 1% while the index is up more than 10%.
Consulting Business Under Pressure
Where Friedman pumps the brakes is IBM’s consulting arm. The bulk of IBM’s AI revenue sits in low-margin consulting — what he describes as “a fragile end market where revenue dilutes consolidated margins.”
He also flagged pressure from hyperscalers bundling frontier AI into cloud contracts, which could push IBM’s watsonx AI products toward niche use cases and limit growth.
Then there’s the COBOL issue. Anthropic released a tool earlier this year designed to modernize legacy COBOL codebases. Friedman sees this as a direct threat to one of IBM’s most lucrative revenue streams — mainframe migration and consulting work tied to legacy systems.
“We see downside catalysts the consulting industry finds hard to shake,” he wrote.
Earnings Beat and What’s Next
IBM’s most recent quarterly results were solid. The company posted EPS of $1.91, beating the $1.81 consensus estimate, on revenue of $15.92 billion — ahead of the $15.60 billion forecast. Revenue grew 9.5% year over year.
On the product side, IBM and Red Hat commercially launched Project Lightwell, a cybersecurity initiative that’s now a live product with enterprise customers. IBM also upgraded its Bob AI development platform with multi-agent capabilities.
Not all the news has been positive. Reports that Starbucks is building internal AI tools to replace software from IBM and Microsoft have rattled sentiment, raising concerns that large enterprise customers could reduce their vendor dependency.
IBM’s Q2 2026 earnings are scheduled for July 22. Analysts expect full-year EPS of $12.45.
Sixteen analysts currently have a Buy rating on IBM, nine have a Hold. The average price target across Wall Street sits at $306.28.
Stop guessing and start investing with confidence. KnockoutStocks gives you the AI insights, market intelligence, and stock research you need to spot opportunities, cut through the noise, and make smarter investment decisions — all in one powerful platform.
Sign up today and get 50% OFF full access to our premium stock picks.
Simply use coupon code SPECIAL50 at checkout to claim your exclusive discount.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
