Is Kyndryl Stock Still a Turnaround Opportunity After Recent Cloud Partnership Momentum?

• If you have been wondering whether Kyndryl Holdings at around $26.77 is a bargain or a value trap, you are not alone. This stock has quietly become one of the more debated turnaround plays in tech services.
• Despite being down 24.6% year to date and 21.5% over the last year, the share price is still up 136.7% over three years, with an 11.0% rise in the last month. A small 2.5% pullback over the last week hints at some renewed volatility.
• That price action has played out alongside ongoing restructuring efforts and a continued push into higher margin cloud, security and managed infrastructure contracts, as Kyndryl distances itself from its legacy IBM roots and positions as an independent specialist. Investors have also been digesting news of fresh partnerships with major hyperscalers and enterprise software vendors. Together, these developments signal a more focused, growth oriented strategy that can materially influence how the market values the business.
• On our framework, Kyndryl scores a 5/6 valuation score, suggesting it screens as undervalued on most of the usual metrics we track. In the next sections, we will break down those different valuation approaches before returning to an even more intuitive way to think about what the stock might be worth.

Find out why Kyndryl Holdings's -21.5% return over the last year is lagging behind its peers.

Approach 1: Kyndryl Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms.

For Kyndryl Holdings, the latest twelve month Free Cash Flow is roughly $249.4 million. Analyst and internal estimates in this analysis assume this rises steadily, with projections reaching about $2.1 billion in annual Free Cash Flow by 2035 as the restructuring and mix shift to higher margin services are reflected. The nearer term forecast for 2028 in this model is $1.0 billion in Free Cash Flow, with the years in between forming a growth path that moves from hundreds of millions into the low billions over the coming decade. Early years are based on analyst estimates, while the outer years are extrapolated to extend the assumed trend.

Using a 2 Stage Free Cash Flow to Equity model, these projected cash flows correspond to an intrinsic value estimate of roughly $74.72 per share, compared with a recent share price of about $26.77. On this methodology, that gap suggests the stock is trading at a discount of around 64.2% to the model’s intrinsic value estimate.

Result: UNDERVALUED (according to this DCF model)

Our Discounted Cash Flow (DCF) analysis suggests Kyndryl Holdings is undervalued by 64.2%. Track this in your watchlist or portfolio, or discover 912 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kyndryl Holdings.

Approach 2: Kyndryl Holdings Price vs Earnings

For profitable companies like Kyndryl Holdings, the Price to Earnings, or PE, ratio is a practical way to gauge whether the share price makes sense relative to the profits the business is already generating. In broad terms, faster growing, higher quality, lower risk companies can justify a higher PE, while slower growing or riskier names typically deserve a lower one.

Kyndryl currently trades on a PE of about 15.0x, which is below the broader IT industry average of roughly 29.3x and also below the selected peer group average of around 17.2x. That discount might suggest the market is still cautious about the turnaround and earnings durability. To refine this view, Simply Wall St uses a proprietary Fair Ratio, which estimates what a reasonable PE should be after accounting for the company’s earnings growth outlook, profitability, risk profile, industry and market capitalization.

Because the Fair Ratio incorporates these fundamentals rather than just comparing Kyndryl to sometimes imperfect peers, it offers a more tailored benchmark. On this framework, Kyndryl’s Fair PE Ratio is about 41.2x, materially higher than the current 15.0x, which suggests the shares continue to trade at a meaningful discount to their fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1462 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kyndryl Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to tie your view of a company’s future to numbers like revenue, earnings, margins and ultimately a fair value estimate.

A Narrative on Simply Wall St is your story behind the numbers, where you spell out what you think will drive Kyndryl’s business, translate that into a financial forecast, and then see the fair value that drops out of those assumptions.

Because a Narrative links the company’s story to forecasts and then to fair value, it becomes an easy, accessible tool on the Community page that millions of investors already use to decide if the current price looks cheap, fair, or expensive relative to their own fair value.

Narratives are also dynamic, automatically updating as new information like earnings releases or major news affects the outlook and, therefore, the gap between Fair Value and Price that can guide investment decisions.

For example, some Kyndryl investors build a bullish Narrative around accelerating AI and cloud services with a fair value above 55 dollars, while more cautious investors focus on legacy contract risks and land closer to 40 dollars, yet both perspectives live side by side as transparent Narratives you can inspect and adapt.

Do you think there's more to the story for Kyndryl Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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