It's time to buy International Business Machines as it's undervalued, according to RBC Capital Markets. Analyst Matthew Swanson initiated coverage of IBM with an outperform rating, saying the value of the tech company's software business specifically is being overlooked by investors. He expects IBM can carve out its own niche in artificial intelligence as it has in hybrid cloud enablement. His $188 price target implies roughly 28% upside from Tuesday's close. IBM shares are higher this year by just 4% even as other tech stocks surged on artificial intelligence enthusiasm. The stock was slightly up in premarket trading. "We're optimistic on the competitive positioning and unique role that IBM plays in the tech eco-system with its value proposition best represented by enabling efficient digital transformation through consulting and software," Swanson wrote Wednesday. "We feel the company's software business is misunderstood, and undervalued, particularly its role in hybrid environments, AI and spend optimization," he added. IBM 1D mountain IBM shares 1-day IBM can support businesses in their A.I. work just like it has with the cloud buildout in a post-pandemic world, the analyst said. "IBM has created what we believe is a unique role in hybrid cloud enablement to allow for digital transformation at enterprise scale, utilizing both IBM products and those of its partners," Swanson wrote. "We feel that IBM is going to use a similar playbook for GenAI, becoming a critical player in the enterprise for governance and model management as it benefits from its independence and being able to share in the success of its partners regardless of the winners," Swanson added. —CNBC's Michael Bloom contributed to this report.
