IBM (ticker: IBM) has been overlooked by investors when it comes to the growth of artificial intelligence (AI), despite its claims for the future of its Watson AI platform. However, analysts at Melius Research believe that the demand for IBM’s consultants to assist with AI implementation could be a game-changer for the company.
AI Consultancy as a Catalyst for Growth
According to Ben Reitzes from Melius Research, the low expectations for IBM’s revenue growth, coupled with the increasing demand for consultants to responsibly implement generative AI, could lead to positive surprises. As companies seek unbiased guidance in deploying AI without relying on profit-driven cloud giants, IBM’s consultants can play a crucial role.
Unlocking IBM’s Potential
Reitzes suggests that for investors to truly recognize IBM’s value, they must consider reevaluating its valuation to align more closely with that of its competitor, Accenture (ACN). Accenture, valued at 25 times its forecasted 2024 earnings, represents the assumptions of rapid growth in consulting and a reduced exposure to the volatile IT hardware market, factors that differentiate it from IBM.
A Promising Outlook
IBM’s stock has remained relatively unchanged this year, while others have surged due to their AI potential. Yet, with a projected growth rate of 3%-5% this year and an earnings forecast for 2025, Ben Reitzes maintains a positive outlook. He rates IBM stock as a Buy with a target price of $175, based on a price-to-earnings multiple of 16 times forecast earnings for 2025.
