Kyndryl Holdings (KD) stock is back in focus after first quarter results missed Wall Street forecasts on both revenue and earnings per share, while management reaffirmed full year guidance despite workforce rebalancing charges.

The recent miss on revenue and earnings comes after a tough stretch for Kyndryl Holdings shareholders, with the year to date share price return down 45.12% and the 1 year total shareholder return down 53.64%. However, the 30 day share price return of 12.91% and 90 day share price return of 14.11% suggest some short term momentum following the buyback progress, AI services launch and reaffirmed guidance.

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Kyndryl Holdings now has a clearer story around AI services and buybacks, yet the share price is still well below its 1 year level. Is this a strong business simply catching up in value, or is it already fairly priced?

Most Popular Narrative: 80% Undervalued

The most followed narrative sees Kyndryl Holdings trading below its fair value estimate of $14.10, with the last close at $13.99. That gap is small in dollar terms, yet the thesis behind it leans heavily on how the business mix could shift over time.

The accelerating adoption of hybrid and multi-cloud environments is fueling demand for Kyndryl's advanced integration and management services, as evidenced by a 44% year-over-year increase in signings and substantial growth in hyperscaler-related revenues, which supports ongoing revenue expansion and a higher recurring revenue base. The company's focus on expanding AI, data, and cybersecurity services, supported by investments in proprietary initiatives like Kyndryl Bridge and new alliances such as Databricks, is allowing Kyndryl to address rising complexity and security requirements, supporting both higher margins and new revenue streams.

Want to see what this recurring revenue story really hinges on? The fair value hangs on a specific mix of margin gains, consulting growth and shrinking share count. Curious which assumptions matter most for Kyndryl Holdings.

Result: Fair Value of $14.10 (UNDERVALUED)

However, Kyndryl Holdings still faces pressure from legacy, lower margin contracts and potential delays in large deal signings that could unsettle the current valuation story.

Next Steps

Mixed signals around Kyndryl Holdings can be confusing, so it helps to check the underlying data yourself, weigh both sides, and then review the 2 key rewards and 3 important warning signs.

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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.