On Thursday, Kyndryl Holdings Inc (NYSE:KD) received a new Outperform stock rating from Oppenheimer, with the firm setting a price target of $33.00 for the company. The new rating is based on Kyndryl's prospects for top-line growth, margin expansion, and expected earnings per share (EPS) of over $3 in FY27E.
Kyndryl, which has separated from its former parent company IBM (NYSE:IBM), is recognized for its ability to renegotiate legacy contracts and forge partnerships with major hyperscalers. The company is also transitioning customers to its Kyndryl Bridge platform, which is anticipated to drive cost savings. Additionally, Kyndryl's Consult business has seen double-digit growth, contributing to the company's positive outlook.
Oppenheimer highlights that these factors position Kyndryl for continued tailwinds that could transform its business. The firm's analysis suggests that what was once considered a less favorable business under IBM now stands as a promising Growth at a Reasonable Price (GARP) investment opportunity.
The endorsement from Oppenheimer comes as Kyndryl aims to redefine itself in the market and demonstrates its ability to operate independently and effectively post-IBM separation. The company's strategic moves to enhance its service offerings and improve profitability are expected to yield significant results in the coming years.
In other recent news, Kyndryl Holdings Inc showed solid growth in strategic initiatives, generating $16.1 billion in revenue for fiscal year 2024. The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 20% to $2.4 billion. Despite a slight decline in revenue, Kyndryl anticipates positive revenue growth in the fourth quarter of the fiscal year 2025. Scotiabank maintained its positive stance on the company, increasing the price target to $30 and reiterating a Sector Outperform rating.
The company also announced a collaboration with NVIDIA (NASDAQ:NVDA) to enhance artificial intelligence applications for businesses, integrating NVIDIA's AI software into its Kyndryl Bridge digital business platform. This partnership aims to provide customers with the necessary tools to effectively scale generative AI solutions.
In addition to these developments, Kyndryl acquired Skytap, a specialized workload services provider, to bolster its hybrid cloud offerings. This acquisition is part of Kyndryl's strategy to invest in areas critical to customer growth and transformation.
InvestingPro Insights
As Kyndryl Holdings Inc (NYSE:KD) garners analyst optimism for its growth trajectory, real-time data from InvestingPro provides a deeper dive into the company's financial health and market performance. Kyndryl's market capitalization stands at $5.89 billion, indicating a significant presence in the market. Despite a challenging past year with a revenue decline of 5.72%, analysts predict a turnaround with net income expected to grow this year, aligning with Oppenheimer’s positive outlook.
The company's stock price has experienced a high return over the last year, boasting a 95.51% increase, which reflects investor confidence and the potential for continued upward momentum. Moreover, Kyndryl is trading at a low revenue valuation multiple, suggesting that its shares might be undervalued relative to its revenue—potentially offering an attractive entry point for investors.
InvestingPro Tips highlight that Kyndryl is a prominent player in the IT Services industry but suffers from weak gross profit margins. However, the company's strategic initiatives, such as the Kyndryl Bridge platform and partnerships with hyperscalers, may contribute to margin improvements over time. For those interested in further analysis and tips, InvestingPro offers additional insights on Kyndryl, and readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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