TLDR
- UBS shifts stance on IBM from Sell to Neutral following approximately 22% year-to-date decline, noting improved risk/reward profile
- Shares currently valued at roughly 18.5x forward 2026 earnings of $12.43, representing a mid-teens valuation discount versus broader indices
- Sharp selloff primarily driven by Anthropic’s Claude Code COBOL modernization announcement, raising concerns about mainframe business vulnerability
- Fourth quarter results exceeded expectations with earnings of $4.52 per share versus $4.33 consensus, while revenue reached $19.69B — representing 12.2% annual growth
- Wall Street maintains Moderate Buy consensus view with mean price objective of $330.07
UBS analyst team has elevated their rating on International Business Machines (IBM) to Neutral from Sell, suggesting the recent significant decline has created a more attractive risk/reward scenario.
International Business Machines Corporation, IBM
Shares of IBM have declined approximately 22% during 2026 and have lagged the S&P 500 by nearly 27% over the trailing twelve-month period.
The technology giant opened Wednesday’s session at $229.34, substantially below its 52-week peak of $324.90.
A significant portion of the recent weakness can be attributed to a single trading session. On February 23, IBM plummeted approximately 13% following Anthropic’s announcement that its Claude Code platform would incorporate COBOL modernization capabilities — triggering investor concerns that artificial intelligence could automate legacy systems and erode IBM’s mainframe and consulting revenues.
Multiple Wall Street analysts, including research teams at Wedbush and Evercore, characterized the selloff as excessive. They highlighted IBM’s substantial customer retention rates and the inherent complexity of migrating mainframe environments as evidence that competitive threats may be exaggerated.
UBS has aligned with this perspective, suggesting that competitive risks facing IBM’s Z mainframe platform appear adequately reflected in current valuations. The investment bank emphasized customer retention dynamics, data sovereignty mandates, and IBM’s comprehensive technology stack — featuring quantum-resistant encryption — as factors making mainframe displacement improbable in the foreseeable future.
What the Numbers Look Like Now
IBM currently commands a valuation of approximately 18.5 times projected 2026 earnings per share of $12.43 and 17.5 times anticipated 2027 earnings of $13.13. This represents a mid-teens valuation discount relative to broader market multiples.
UBS maintained its $236 price objective, derived from applying an 18x multiple to its 2027 EPS projection. Under an optimistic scenario, UBS projects shares could reach $312 if software segment growth accelerates and profitability margins expand. Conversely, a bearish scenario envisions shares declining to $134 if AI-powered coding solutions significantly disrupt IBM’s software and infrastructure revenue streams.
Management has provided guidance for 2026 free cash flow of $15.7 billion, translating to approximately $16.25 per share — representing roughly a 7% free cash flow yield. UBS notes this metric aligns with comparable large-cap software enterprises generating mid-single-digit revenue growth.
UBS projects IBM will achieve 3% to 4% organic revenue expansion over coming years. The firm identified decelerating growth at Red Hat, evolving demand patterns in the Consulting division as AI transforms client needs, and persistent headwinds in IBM’s infrastructure segment as continuing challenges.
Q4 Results and Analyst Ratings
IBM’s latest quarterly performance demonstrated strength. The technology company posted Q4 earnings per share of $4.52, surpassing the $4.33 Wall Street consensus. Revenue totaled $19.69 billion, exceeding analyst projections of $19.23 billion and marking 12.2% year-over-year expansion.
IBM additionally announced a quarterly dividend distribution of $1.68 per share, scheduled for March 10 payment. This represents an annualized dividend yield of approximately 2.9%.
Board member David N. Farr acquired 1,000 shares at $304.00 on January 30, expanding his total position to 9,258 shares.
Vestmark Advisory Solutions expanded its IBM position by 413.7% during Q3, purchasing 6,209 additional shares for a cumulative holding of 7,710 shares.
Throughout Wall Street, IBM maintains a consensus Moderate Buy recommendation with a mean price objective of $330.07, derived from one Strong Buy, eleven Buy, seven Hold, and one Sell rating.
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