RBC initiated coverage on IBM (NASDAQ:IBM) with an Outperform rating and a $188 per share price target, the highest on the Street. As a result, shares rose around 3% intra-day today.

RBC is optimistic about IBM’s competitive position in the tech industry, particularly its role in enabling efficient digital transformations through consulting and software. They believe IBM’s software business is undervalued, especially in hybrid environments, artificial intelligence (AI), and cost optimization.

The analysts pointed out that while investors often see IBM as a hardware and services company, the company’s software business, with over $20 billion in revenue and high single-digit growth, is poised to become a more significant part of its overall revenue, leading to improved profitability.

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