TLDR
- UBS upgraded IBM from Sell to Neutral after the stock fell ~22% in 2026, citing a more balanced risk/reward
- IBM now trades at ~18.5x its 2026 EPS estimate of $12.43, at a mid-teens discount to the broader market
- The drop was triggered largely by Anthropic’s Claude Code announcing COBOL modernization tools, sparking fears over IBM’s mainframe business
- IBM beat Q4 estimates with $4.52 EPS vs $4.33 expected, and revenue of $19.69B — up 12.2% year-over-year
- Consensus analyst rating remains Moderate Buy with an average price target of $330.07
UBS has upgraded International Business Machines (IBM) to Neutral from Sell, pointing to a more balanced risk/reward after a steep selloff in early 2026.
International Business Machines Corporation, IBM
IBM has dropped roughly 22% so far this year and underperformed the S&P 500 by nearly 27% over the past 12 months.
The stock opened at $229.34 on Wednesday, well below its 52-week high of $324.90.
Much of the recent decline traces back to a single day. On February 23, IBM fell roughly 13% after Anthropic announced that its Claude Code tool would support COBOL modernization — raising fears that AI could automate legacy workloads and cut into IBM’s mainframe and consulting revenue.
Several analysts, including those at Wedbush and Evercore, called that selloff overdone. They pointed to IBM’s strong customer lock-in and the complexity of migrating mainframe workloads as reasons the threat may be overstated.
UBS echoed that view, saying the competitive risk to IBM’s Z mainframe platform now appears largely priced in. The firm cited customer stickiness, data sovereignty requirements, and IBM’s vertically integrated stack — which includes quantum-safe encryption — as reasons mainframe disintermediation is unlikely in the near term.
What the Numbers Look Like Now
IBM now trades at roughly 18.5 times its 2026 EPS estimate of $12.43 and 17.5 times its 2027 estimate of $13.13. That puts it at a mid-teens discount to the broader market.
UBS kept its price target at $236, based on 18 times its 2027 EPS estimate. In a bull case, UBS sees the stock reaching $312 if software growth accelerates and margins expand. In a bear case, it drops to $134 if AI coding tools disrupt IBM’s software and infrastructure revenue.
IBM guided to 2026 free cash flow of $15.7 billion, or about $16.25 per share — implying a roughly 7% free cash flow yield. UBS said that’s in line with other large software companies growing revenue in the mid single digits.
UBS expects IBM to deliver 3% to 4% organic revenue growth over the next several years. The firm flagged slowing growth at Red Hat, uncertainty in the Consulting unit as AI reshapes demand, and broader pressure on IBM’s infrastructure business as ongoing concerns.
Q4 Results and Analyst Ratings
IBM’s most recent quarterly results were solid. The company reported Q4 EPS of $4.52, beating the $4.33 consensus estimate. Revenue came in at $19.69 billion, topping expectations of $19.23 billion and up 12.2% year-over-year.
IBM also declared a quarterly dividend of $1.68 per share, payable March 10. That works out to an annualized yield of roughly 2.9%.
Director David N. Farr bought 1,000 shares at $304.00 on January 30, bringing his total holding to 9,258 shares.
Vestmark Advisory Solutions increased its IBM stake by 413.7% in Q3, adding 6,209 shares for a total of 7,710.
Across Wall Street, IBM carries a consensus Moderate Buy rating with an average price target of $330.07, based on one Strong Buy, eleven Buy, seven Hold, and one Sell rating.
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