IBM Stock Drops as Three Firms Slash Targets Before Earnings

TLDR

• Needham cut its IBM price target to $290 from $340, citing Gulf conflict headwinds and forex pressure
• Stifel also lowered its target to $290 from $340, while keeping a Buy rating
• BMO Capital trimmed its target to $290 from $350, maintaining a Market Perform rating
• IBM Q1 earnings are due April 22; analysts expect an in-line but seasonally weak quarter
• The Confluent acquisition closing ahead of schedule is seen as a rare bright spot

Three Wall Street firms cut their IBM price targets this week, all landing on the same number — $290 — ahead of the company’s first-quarter earnings report on April 22.

International Business Machines Corporation, IBM

Needham analyst David Grossman lowered his target from $340 to $290, pointing to potential headwinds from the Gulf conflict on software and services growth, along with a meaningful foreign exchange move working against the company.

On the positive side, Grossman noted the Confluent acquisition closing ahead of schedule as a tailwind. Still, his revised 2026 constant currency revenue growth estimate of 4.5% to 5.0% sits just below the company’s own guidance of 5.0%.

Grossman models earnings per share of $12.38, up 7% year-over-year, with free cash flow rising by $1 billion, also up 7%. Pre-tax income margins are expected to expand by 100 basis points.

Stifel made the same cut — from $340 to $290 — while holding onto its Buy rating. The firm cited the same combination of Gulf conflict exposure and currency pressure as its reasoning.

Stifel also does not expect IBM to make material changes to its guidance when it reports, given the uncertain macro environment and the fact that Q1 is historically the company’s weakest quarter.

The stock trades at 15 times free cash flow, compared to low-to-mid teens for infrastructure software peers growing in the mid-to-high single digits. With a P/E ratio of 21.88 and a PEG ratio of 0.3, some data points suggest the stock may be undervalued relative to near-term earnings growth.

IBM currently sits at $245, which InvestingPro data flags as below its Fair Value estimate.

Three Firms, One Number

BMO Capital also lowered its target, cutting from $350 to $290 while maintaining a Market Perform rating. BMO flagged concerns around software multiple compression but acknowledged IBM’s product breadth, AI exposure, quantum potential, and dividend stability.

All three firms arriving at the same $290 target is worth noting. It implies roughly 18% upside from current levels if the stock were to reach that mark.

Over the past 90 days, IBM has tracked in line with the iShares Expanded Tech-Software Sector ETF, reflecting the market’s view that software is now the primary growth engine for the company.

What’s Coming on April 22

IBM is set to report Q1 results on April 22. Analysts broadly expect the quarter to come in line with estimates, without surprises in either direction.

Beyond earnings, IBM recently received FedRAMP authorization for 11 AI and automation software solutions, allowing federal agencies to use them on AWS GovCloud.

The company also launched a 10-year research collaboration with ETH Zurich focused on AI and quantum computing, and announced a partnership with Arm to develop dual-architecture hardware for AI and data-intensive workloads.

IBM’s quantum computer has also successfully simulated magnetic materials, with results matching neutron scattering experiments conducted at national laboratories.

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