IBM (IBM) is well-positioned for sustained "double-digit" revenue growth, driven by an expanding software portfolio, especially Red Hat, Oppenheimer said Tuesday in a report.

Oppenheimer initiated coverage of IBM with an outperform rating and a $320 price target, driven by sustained growth led by Red Hat, a rebound in consulting revenue in late 2025 and expanding opportunities in artificial intelligence application development, including generative AI, the report said.

"We believe these drivers will result in strong expansion activity with existing customers, and drive continued gross (on higher software mix) and pretax margin expansion," Oppenheimer said.

"IBM is addressing the AI opportunity across the tech stack, which is incremental to our current estimates," Oppenheimer said.

IBM's expanding AI presence is a growth catalyst, and the stock is undervalued compared with peers, warranting a higher rerating as its software shift gains recognition, the report said.

Shares of IBM rose 2.4% in recent Tuesday trading.

Price: 255.21, Change: +5.94, Percent Change: +2.38