Technology stocks are back, and IBM is among those spearheading the stock market’s recent advance. After tumbling to a 52-week low of 69.50 a share last Nov. 20, IBM has recovered nicely, closing at 105 on May 5.

True, that is still below its 52-week closing high of 130.93 reached on July 24, 2008. But some close IBM watchers believe the stock is well on its way to surpassing that peak in the next 12 months. On May 5, Standard & Poor’s analyst Thomas W. Smith raised his 12-month price target to 139 from 130 after IBM announced it was buying Exeros, a small, privately held software outfit. [S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies.]

Smith says the acquisition will add “capability to IBM’s initiatives aimed at helping customers manufacture sense out of their business goods,” and use the data for “competitive and strategic plans.” He adds that by making warehoused info more valuable to clients, IBM will spur interest in both its consulting services and other product lines.

As a outcome, Smith, who rates IBM a strong buy, sees increased value in the company’s strategy and figures it deserves a higher price target in part based on its price-earnings ratio: The stock currently trades at 14 times his 2009 earnings estimate of $9.25 a share. His new stock price target of 139 puts IBM’s p-e at 15, which, he notes, may be even modest, based on IBM’s historical p-e multiple range of 15 to 20. The last instance IBM’s stock hit 139 was in 1999, when its p-e ratio was 34. For 2010, Smith forecasts IBM earning $10.20 a share.

Fast Track to Profits

IBM, which S&P describes as the world’s largest technology company, provides a diversified line of computer hardware, application and systems software, and related services. The purchase of…

[Source] dhiram