IBM Rated Buy On ‘Upside Potential,’ Artificial Intelligence Move – Investor’s Business Daily

IBM CEO Ginni Rometty told investors that her company is emerging as a leader in cognitive computing. (IBM)

IBM (IBM) is an attractive turnaround story with improved fundamental trends, says a Drexel Burnham analyst who reiterated a buy rating and raised his price target on the computer giant.

The buy rating by Drexel Burnham analyst Brian White follows a day of briefings that IBM presented to investors at its annual Investor Briefing conference that ended Tuesday.

"We believe IBM has further upside potential as the fruits of the company's labor around its strategic imperatives are better appreciated and more investors warm up to the stock," White wrote in a research note. Along with his buy rating, White raised his price target on IBM to 215, from 186.

IBM stock ended the regular trading session at179.45, down fractionally on the stock market today. It's currently trading near a 29-month high.

The investor's day events included a presentation by IBM Chief Executive Ginni Rometty, who said the company has reached an important moment with a solid foundation and is emerging as a leader in cognitive computing with its Watson computing platform and cloud services.

Announcements from the investor briefing included IBM and Salesforce.com (CRM) agreeing to a strategic partnership focused on artificial intelligence and supported by IBM's Watson computer and the Einstein computing platform by Salesforce.com.

Salesforce and IBM will combine their two AI offerings but will also continue to sell the combined offering under two brands. Salesforce and IBM said they would "seamlessly connect" their AI offerings "to enable an entirely new level of intelligent customer engagement across sales, service, marketing, commerce and more."

Salesforce stock finished at83.48, up 0.6%.

Decades of research and billions of dollars have poured into developingartificial intelligence, which has crossedover from science fiction to game-show novelty to the cusp of widespread business applications. IBM has said Watson represents a new era of computing.

IBD'S TAKE: After six consecutive quarters of declining quarterly earnings at IBM,growth may be on the mend. IBM reported fourth-quarter earnings after the market close Jan. 19 that beat on the top and bottom lines for the fifth straight quarter.

"We believe IBM is furthest ahead in the cognitive computing movement and we believe the Salesforce partnership is only the beginning of more deals in the coming years," White wrote.

Other companies investing heavily in AI include Google parent Alphabet (GOOGL) and graphics chip company Nvidia (NVDA).

Alphabet has used AI to enhance Google search abilities, improve voice recognition and to derive more data from images and video.

Nvidia has developed chip technology for AI platforms used in autonomous driving features, and to enhance how a driver and car communicate.

Not everyone is a bull on the IBM train. Credit Suisse analyst Kulbinder Garcha, has an underperform rating on IBM and price target of 110. Garcha, in a research note, said IBM remains in a multiyear turnaround.

"We believe it will take multiple years for faster growing segments such as the Cognitive Solutions segment and Cloud to offset the decline in the core business," Garcha wrote.

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IBM Rated Buy On 'Upside Potential,' Artificial Intelligence Move - Investor's Business Daily