Why IBM Is Worth $220 a Share

Tickers in this article: IBM

NEW YORK (TheStreet) -- Shares of IBM IBM have dropped sharply this year, but one analyst believes that over the next 12 months, the stock has nearly 20% upside.

Cantot Fitzgerald analyst Brian White, who rates shares "buy" with a $220 price target, believes that value investors will start to move towards IBM, which trades at an approximately 40% discount to the S&P 500.

"Over the past few months, there has been a rotation in the mega-cap tech stocks in our coverage universe that has driven an average increase of 12.6% in this group (i.e., ex-IBM but including Apple, Cisco Systems, EMC, Hewlett-Packard, and Oracle) thus far in 2014 versus a 6.8% increase for the S&P 500. However, IBM has significantly underperformed the
group and is down nearly 1% thus far in 2014," White wrote in the note. He notes that IBM shares have risen just 1% since the end of 2011, compared to 57% for the S&P 500, and a 43% average rise for companies like Apple, Cisco, EMC, HP and Oracle.

He also notes that sentiment among the sell-side is exceptionally low, "with just 15% of sell-side analysts having buy ratings on the stock."

IBM is set to report second-quarter earnings later this month. Analysts surveyed by Thomson Reuters expect the company to earn $4.29 a share on $24.12 billion in revenue.

-- Written by Chris Ciaccia in New York

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