Key Takeaways
- UBS has lifted its IBM rating from Sell to Neutral following a roughly 22% decline in 2026, pointing to improved risk/reward dynamics
- The tech giant currently trades at approximately 18.5x its projected 2026 earnings per share of $12.43, representing a mid-teens discount versus broader indices
- The stock’s plunge was primarily driven by Anthropic’s introduction of Claude Code with COBOL modernization capabilities, raising concerns about IBM’s legacy mainframe operations
- Fourth-quarter performance exceeded Wall Street expectations with adjusted EPS of $4.52 versus the $4.33 consensus, while revenue reached $19.69B — reflecting 12.2% annual growth
- Wall Street maintains a Moderate Buy consensus with an average target price of $330.07
UBS analysts have shifted their stance on International Business Machines (IBM), upgrading shares to Neutral from Sell as they believe the risk/reward profile has become more attractive following a significant early-year selloff.
International Business Machines Corporation, IBM
Shares of IBM have tumbled approximately 22% year-to-date in 2026 and have lagged the S&P 500 by nearly 27 percentage points over the trailing twelve-month period.
The stock commenced Wednesday’s trading session at $229.34, substantially below its 52-week peak of $324.90.
A significant portion of the recent downturn can be attributed to a single trading day. On February 23, IBM shares plummeted approximately 13% following Anthropic’s announcement that its Claude Code platform would include COBOL modernization functionality — sparking concerns that artificial intelligence could automate legacy computing workloads and erode IBM’s mainframe and consulting revenues.
Multiple Wall Street firms, including Wedbush and Evercore, characterized that sharp decline as excessive. These analysts highlighted IBM’s substantial customer retention and the technical challenges associated with mainframe migration as evidence that the competitive threat may be exaggerated.
UBS shares this perspective, noting that competitive risks to IBM’s Z mainframe platform now appear adequately reflected in the current valuation. The investment bank emphasized customer loyalty, data sovereignty mandates, and IBM’s comprehensive vertically integrated technology stack — featuring quantum-resistant encryption — as factors suggesting mainframe displacement remains unlikely in the foreseeable future.
Current Valuation Metrics
IBM currently commands a valuation of approximately 18.5 times its 2026 earnings per share projection of $12.43 and 17.5 times its 2027 forecast of $13.13. This represents a mid-teens valuation discount relative to the overall market.
UBS maintained its $236 price objective, calculated using an 18x multiple on its 2027 EPS forecast. Under an optimistic scenario, UBS projects shares could reach $312 if software segment growth accelerates and profit margins expand. Conversely, in a pessimistic scenario, the stock could decline to $134 if AI-powered coding solutions significantly disrupt IBM’s software and infrastructure revenue streams.
IBM provided 2026 free cash flow guidance of $15.7 billion, translating to approximately $16.25 per share — which implies a roughly 7% free cash flow yield. UBS notes this yield aligns with comparable large-cap software companies experiencing mid-single-digit revenue growth.
UBS anticipates IBM will generate 3% to 4% organic revenue expansion over the coming years. The firm identified decelerating growth at Red Hat, uncertainty surrounding the Consulting division as artificial intelligence transforms client demand patterns, and continued headwinds facing IBM’s infrastructure operations as persistent challenges.
Latest Quarterly Performance and Wall Street Sentiment
IBM’s latest quarterly financial results demonstrated strength. The technology company posted fourth-quarter adjusted EPS of $4.52, surpassing the $4.33 analyst consensus. Revenue totaled $19.69 billion, exceeding expectations of $19.23 billion and representing a 12.2% year-over-year increase.
IBM additionally announced a quarterly dividend of $1.68 per share, scheduled for March 10 distribution. This equates to an annualized dividend yield of approximately 2.9%.
Board member David N. Farr purchased 1,000 shares at $304.00 on January 30, increasing his total position to 9,258 shares.
Vestmark Advisory Solutions expanded its IBM position by 413.7% during the third quarter, acquiring 6,209 additional shares to reach a total of 7,710 shares.
Among Wall Street research firms, IBM maintains a consensus Moderate Buy recommendation with an average price objective of $330.07, derived from one Strong Buy, eleven Buy, seven Hold, and one Sell rating.
