HSBC has moved IBM into a Reduce rating from Hold and trimmed its price objective to $191 from $231, according to a research note issued on Tuesday. The bank contends that investors could achieve stronger earnings exposure by assembling a group of IBM peers rather than owning IBM shares directly.
Analyst Abhishek Shukla explained that HSBC built what it calls a "synthetic IBM" by combining shares of SAP, Accenture, HP and IonQ. That composite, the note says, would cost $287.56 in total - effectively matching IBM's current market price.
HSBC's projection for the synthetic portfolio shows estimated 2030 earnings per share of $23.15. By contrast, the bank's forecast for IBM's non-GAAP EPS in 2030 is $16.59, a gap HSBC quantifies as about a 40% difference, while asserting that the two approaches offer broadly similar subsector exposure.
The research note raises specific competitive and durability concerns for IBM. On quantum computing, HSBC points to IonQ as a faster mover, noting that IBM took in only $100 million of new quantum computing orders across the past five quarters compared with almost $600 million for IonQ, according to the bank's figures.
HSBC further questioned the sustainability of IBM's growth, saying it is comparatively more dependent on ongoing cost cutting than peers such as SAP and Accenture. The bank projects IBM's software non-GAAP EBIT will compound at a 10.6% annual rate through 2030 - roughly in line with SAP - but says that pace is reached with weaker revenue growth behind it.
Valuation also factored into HSBC's view. The note points out that IBM is trading at 22.0 times its 2027 estimated non-GAAP price-to-earnings ratio, above a sector median of 16.9 times, even though its expected earnings growth is slower. Based on the bank's revised outlook and valuation work, the new price target implies a potential downside of 33.6% from current levels.
Market context and immediate reaction
The note lists the components of the synthetic portfolio - SAP, Accenture, HP and IonQ - as the peer mix HSBC uses to replicate IBM's subsector exposures. The bank's analysis highlights the relative earnings potential of that mix versus an investment in IBM at today's prices, while also calling attention to execution and order-flow risks in IBM's quantum effort.
Shares mentioned in the note include IBM, ACN, HPQ, SAP and IONQ.