In a research report released Thursday, Morgan Stanley analyst Kathryn Huberty reiterated an Overweight rating on shares of International Business Machines Corp. (NYSE:IBM), while raising the price target to $168 (from $140) due to two main reasons: 1) Strong Watson customer growth and 2) more confidence in full-year estimates.
IBM shares are currently trading at $151.08, up $2.69 or 1.81%.
Huberty wrote, “After aggressive hiring and an estimated $5B in data acquisitions over just the past two quarters, IBM is beginning to show a path toward revenue monetization in Watson. Based on our Watson Customer Tracker, the business is on track to double announced customer in 2016 after a significant ramp last year […] Our recent meetings with IBM Watson Health highlight clear path to revenue in sizeable markets.For instance, 320M annual radiology images at $10 per image translates to a $3B+ market just in the US. There are even larger revenue opportunities to IBM if it can reduce the number of tests/images which often cost multiple thousands of dollars. Other revenue streams exist in helping match Oncology patients with drug trials. ”
“While we’re leaving our EPS and FCF estimates unchanged, we have increased confidence IBM can hit 2016 guidance despite a choppy spending environment,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Kathryn Huberty has a total average return of 16.8% and a 63% success rate. Huberty has a 12% average return when recommending IBM, and is ranked #72 out of 3775 analysts.