IBM's Q1 Marks First Full Quarter With Kyndryl as Only a Customer; Shares Fairly Valued

IBM's first-quarter results missed our expectations on the bottom line. We had been slightly more optimistic on margin expansion given that the quarter was the first full quarter in which IBM's low-margin Kyndryl business had been spun off. Nonetheless, the quarter included bright spots like upped guidance and strength in consulting revenue, as digital transformation demand has seemingly no end in sight. All in all, we're maintaining our fair value estimate of $126 per share for the narrow-moat IT services provider, which leaves the company fairly valued. Shares are up nearly 2% upon results, which we believe to be a result of guidance.