Market Overview

IBM's Watson Is Beginning To Pay Off

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IBM's Watson Is Beginning To Pay Off

Following the aggressive hiring and estimated data acquisitions worth $5 billion, International Business Machines Corp. (NYSE: IBM) appears all set to benefit from the revenue monetization of Watson.

Morgan Stanley’s Katy L. Huberty maintained an Overweight rating on the company, while raising the price target from $140 to $168.

Watson Monetization

“Based on our Watson Customer Tracker, the business is on track to double announced customer in 2016 after a significant ramp last year,” Huberty mentioned, while adding that the revenue models included “revenue sharing, IP sharing, and IBM built solutions charged as-a-service.”

Related Link: Would Buffett Support An IBM Watson Spinoff?

Although the revenue base might appear small at present, the analyst expects the SaaS-like model to lead to sustainable revenue streams in the long term.

Market Opportunity

Huberty also pointed out that there were significant market opportunities for Watson, with 320 million annual radiology images at $10 per image translating to a market that was over $3 billion in the U.S. alone.

In addition, Huberty also noted that there could be “even larger revenue opportunities to IBM if it can reduce the number of tests/images which often cost multiple thousands of dollars. Other revenue streams exist in helping match Oncology patients with drug trials.”

The company has already announced having entered into several hospital partnerships in the United States, and believes that there could be significant opportunity in the emerging markets, where there is a shortage of domain experts, while the growing patient population leads to high demand.

Image Credit: By Clockready - Own work, CC BY-SA 3.0, WikiMedia

Latest Ratings for IBM

DateFirmActionFromTo
Oct 2020BMO CapitalMaintainsMarket Perform
Oct 2020Morgan StanleyMaintainsEqual-Weight
Jul 2020Argus ResearchUpgradesHoldBuy

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