Street View: IBM still a safe haven despite challenging macro environment

International Business Machines IBM.N on Wednesday said 15 of its government contracts were shelved under a cost-cutting drive by the Trump administration, a setback that eclipsed its upbeat revenue forecast

Shares down 7.94% at $225.98 in premarket trading

"DEFENSIVE BUT BETTER OFFENSE BEYOND"

RBC Capital Markets ("outperform," PT: $276) continues to feel that IBM is well positioned to benefit from the buildout of hybrid cloud and GenAI infrastructure despite a more challenging near-term macro

Evercore ISI ("outperform," PT: $275) says mainframe cycle tailwinds, visibility in Red Hat growth, and contribution from M&A should position the company for second half inflection

Morningstar (fair value: $242) anticipates that constrained discretionary budgets and ongoing federal contract reductions will weigh on consulting revenue in the near to medium term

"Nevertheless, robust software demand should continue to support overall growth"

Morgan Stanley ("equal-weight," PT: $233) says while one quarter doesn't make a trend, software growth now needs to accelerate in the face of an uncertain macro backdrop and increasingly more difficult comparisons

However, brokerage expects a free cash flow (FCF) upside this year, if USD remains weak