How much upside from a stock would you demand for a new Buy or Outperform rating? That is a serious question that investors have to ask themselves now as the post-election rally has continued on and on into 2017. In the case of International Business Machines Corp. (NYSE: IBM), investors need to ask themselves this even more.

IBM has been given mostly positive views after its 2017 investor briefing this week. Some firms did not raise their price targets, but we have yet to see any analyst calls lowering price targets. The real issue is whether the run from its bottom in 2016 has been ahead of itself or if there are good things happening that are not priced into IBM in this pro-growth environment.

24/7 Wall St. has tracked several research notes. Some are more bullish than others, yet there are two rather cautious analysts who have so far refused to loosen up their negative stranglehold in IBM’s stock valuation.

JMP Securities reiterated its Market Outperform rating on IBM, and it raised the price target to $188 from $175, after attending the 2017 investor briefing. The firm said:

Like last year, the overarching theme of the investor briefing was IBM’s ability to build “a unique and enduring” cognitive and cloud platform. To this end, once again the focus of the investor briefing was Watson’s differentiation and the value of the IBM platform, including its industry focus (especially in healthcare and financial services), its AI capabilities (which it believes makes it unique against the competition), its ecosystem (for example its recent partnership announcement with salesforce.com), among other differentiators.

One thing that JMP’s message really conveyed here is that CEO Ginni Rometty was absolutely confident that IBM will return to revenue growth. Her view is that IBM’s strategic imperatives will continue to grow in the double digits. JMP feels that there is visibility into the crossover point where the faster-growing parts of the business will become bigger than the declining parts of its business. JMP maintained its 2017 non-GAAP EPS estimate of $13.85 per share and 2018 estimate of $14.06 (versus $13.72 and $14.07 consensus, respectively). The $188 target now implies a 2018 price-to-earnings (P/E) multiple of 13 rather than the prior 12.

A much more bullish view on IBM came from Drexel Hamilton. The firm sees IBM as an attractive turnaround story with improved fundamental trends. It reiterated its Buy rating and raised its target to $215 from $186 in that call. This upgrade is based on a belief that IBM has even more fruits of its labor coming as the strategic imperatives are getting better appreciation by investors.

Merrill Lynch reiterated its Buy rating on IBM and the firm has a $200 price objective. Its report said:

IBM reiterated its long term financial targets but tone was decidedly more positive. CEO Rometty expects IBM to return to rev growth and drive margin expansion. Investments in place, now task is to scale. A platform approach drives protection of investment and enables future innovation. Watson, cloud fit this framework.

We view IBM as a defensive investment given its high exposure to recurring sales, cost cutting levers, solid balance sheet, potential share gains, and relatively stable margins. We believe IBM will embark on further cost cutting, and enhance its services and software offerings through acquisitions. Longer term, we expect IBM to take share in IT spending with its Cloud and AI initiatives. We believe 2017 will be the start of a turnaround in fundamentals.

Other calls were more or less in line with the recent share prices:

• JPMorgan raised its target $184 from $170.
• Goldman Sachs raised its target to $175 from $160.

Credit Suisse is still the most negative of all firms when it comes to IBM. That call was working for a long time, but IBM’s recovering shares have made this target seen harder and harder to justify. Credit Suisse kept its Underperform rating and its street-low analyst target price of $110. The report noted:

The clear emphasis was the creation of an entire strategy dependent upon Watson, and to a lesser extent, growth in the Strategic Imperatives. What was lacking from the company in our view is the relative size of this business and, ultimately, if and when, IBM overall can return to growth on a revenue and profit basis. We see a continuing multi-year turnaround from here and see downside to $110 from current levels.

There was another analyst who remained quite negative. This call has started looking as though it is holding on to an old story longer than the call was welcome, but Jefferies maintained its Underperform rating and its $125 price target. The report said:

Like last year, IBM spent a large portion of the analyst day with testimonials and demonstrations for Watson. Other adjacencies such as blockchain and quantum computing definitely sound like they have interesting long term potential. However, the lack of financial metrics around these areas continues to temper our enthusiasm and doesn’t change our fundamental view of the business.

Wedbush Securities issued a derivative call on IBM, via Accenture PLC (NYSE: ACN). The report was much more favorable on Accenture than on IBM:

In our view, IBM’s as well as most Tier I offshore vendors’ ongoing challenges in migrating IT Services revenues from legacy into digital sets Accenture apart from its peers, specifically, following 4 years of transition (at Accenture), where digital and Cloud account for 40% of Accenture’s revenues base and posting 25-30% YOY growth. IBM’s challenges continue to reflect revenue/margin pressure from ongoing revenue transition into delivery platforms (cloud and automation). Additionally, in-line with our IT spending survey results, IBM’s large exposure to renewals is also likely driving top line pressure as these deals get unbundled and IBM loses market share to competitors. Lastly, IBM’s focus on hybrid cloud solutions validates the strategy of competitors such as ACN, who have focused in this area for several years.

IBM shares were last seen trading up 0.15% at $180.65 on Wednesday, in a 52-week range of $138.09 to $182.79. IBM’s consensus analyst price target was $166.11 before these targets were hiked, but that target likely will tick higher once the newer targets get factored in.

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