International Business Machines Corp. (NYSE: IBM) has struggled for year to get out of what some analysts have called a value trap. However, Big Blue hasn’t made the headway it needs so far in 2017. As a result, one analyst is slashing its target for the computer giant and sees further downside for the stock.
Jefferies reiterated an Underperform rating for IBM, and lowered its price target to $125 from $135. The prior closing price was $153.19, so the price target cut implies downside of 18%.
The brokerage firm’s checks suggest that while IBM offers one of the more mature cognitive computing platforms today, the hefty services component of many artificial intelligence (AI) deployments will be a hindrance to adoption. At the same time, Jefferies also believes that IBM appears outgunned in the war for AI talent and likely will see increasing competition. Finally, its analysis suggests that the returns on IBM’s investments are unlikely to be above the cost of capital.
http://247wallst.com/technology-3/2017/07/12/why-jefferies-is-taking-a-backseat-on-ibm/