International Business Machines NYSE:IBM shares slipped about 1.5% on Friday after Susquehanna initiated coverage of the technology company with a Neutral rating and a $303 price target.
Susquehanna said IBM continues to benefit from solid software momentum, noting Watsonx AI bookings have exceeded $12.5 billion while the company generates about $15.7 billion in free cash flow. The firm also assigned an estimated value of $65 per share to IBM's quantum computing business and said the z17 mainframe cycle could continue supporting results.
However, Susquehanna said IBM's consulting segment may face pressure from increased automation and excess industry capacity, creating uncertainty for future growth. The brokerage also noted IBM trades at roughly nine times its historical valuation premium and about three times that of the broader S&P 500, following a roughly 25% gain during the second quarter.
The firm said quantum computing remains a potential long-term catalyst, although commercial adoption is still developing and future demand is difficult to forecast. Shares of IBM were down about 1% in early trading following the initiation of coverage.