Sterne Agee’s Shaw Wu this afternoon started coverage of International Business Machines (IBM) with a Buy rating and a $230 price target, writing that the stock’s current 11.4 forward P/E multiple on projected 2013 EPS of $17 should be more like 13.5 times, as the company deserves a premium given “its relative predictability.”
EPS growth of 10% to 15% over several years is “not dependent on the top line, but rather a growing mix of higher-margin software (23% of revenue) through organic means and acquisitions” writes Wu. And he thinks the company’s goal to reach $20 per share in profit by 2015 is “achievable.”
Wu calls IBM the “model enterprise company,” in its early appreciation of how to “add value” with services, and also the role the company has taken as the “strategic advisor of choice to governments and corporations around the world.”
IBM shares today closed down 82 cents, or 0.4%, $192.82.
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