Kyndryl Holdings (KD) has come under pressure after its latest quarterly and full-year earnings report, where profits and revenue fell short of expectations and the stock sold off on the results.

Those weaker earnings have been reflected in the share price, with a 90 day share price return of 46.19% decline and a 1 year total shareholder return of 65.49% decline. This points to fading momentum despite ongoing contract wins and product updates.

If this kind of reset has you looking around the market, it could be a good moment to scan for other opportunities in resilient IT and digital infrastructure through the 40 AI infrastructure stocks

With the stock down sharply over the past year but trading at an estimated 35% discount to some intrinsic value models and below analyst targets, is this reset creating a buying opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 14% Undervalued

At a last close of $12.64 versus a widely followed fair value of $14.70, the current price sits below what the leading narrative suggests, and that view rests heavily on how Kyndryl is reshaping its contract mix and service focus.

Shifting the revenue mix towards higher margin, post spin contracts and away from legacy, lower margin contracts is enabling consistent margin expansion, with a growing portion of earnings and free cash flow now attributable to new, more profitable business. Operational efficiency improvements, including automation and cost optimization initiatives, are reducing SG&A and delivery expenses, further boosting net margins and supporting projected strong growth in EBITDA, pretax income, and free cash flow in the coming years.

Want to see what sits behind that margin story and fair value gap? The narrative ties steady top line expectations to sharply stronger profits and a lower future earnings multiple. The valuation hinges on how much earnings can compound as legacy contracts roll off and efficiencies stack up, all under a single discount rate that pulls those assumptions back to today.

Result: Fair Value of $14.70 (UNDERVALUED)

However, that margin story still depends on replacing legacy, lower margin contracts and managing legal and regulatory issues that could absorb cash and management attention.

Next Steps

Seen enough to sense both caution and potential here? Review the numbers yourself, then weigh up the 2 key rewards and 2 important warning signs

Looking for more investment ideas?

Before moving on, take a moment to line up a few fresh ideas so you are not relying on just one stock or story.

• Target value opportunities that pair quality fundamentals with attractive pricing by checking out the 51 high quality undervalued stocks
• Strengthen your income stream by reviewing companies in the 12 dividend fortresses
• Prioritise resilience by focusing on companies highlighted in the 72 resilient stocks with low risk scores

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.