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IBM - Kyndryl: Good Work With A Poor Asset; Time To Ring The Register (Rating Downgrade)
International Business Machines Corporation
2024-06-12 15:24:32 ET
Summary
Kyndryl came public via a spin-out from IBM in November 2021.
Initially, the risk-reward trade-off was very compelling, offering deep value buyers an outstanding opportunity if management delivered on a modest self-help plan.
The stock has risen about 40% from the date of the spin, and over 200% off the bottom.
To management’s credit, the story has largely played out as intended, but consistent profitable growth will be a tougher task, and the higher valuation leaves less room for upside given the FCF outlook.
We recommend taking profits in the stock and are lowering our rating to Hold.