UBS has upgraded IBM to Neutral from Sell after the stock's 22% decline in 2026 reset its valuation. The brokerage cited improved risk/reward balance as concerns about execution, acquisitions, and premium pricing have been priced into the shares, which now trade at a mid-teens discount to the broader market.

IBM shares have underperformed the S&P 500 by nearly 27% over the past year, now trading at roughly 18.5 times its 2026 earnings estimate of $12.43 per share. The company guided to 2026 free cash flow of $15.7 billion, implying a roughly 7% free cash flow yield that UBS said aligns with other large software companies growing revenue in the mid-single digits.

Despite keeping its price target at $236, UBS outlined bull and bear scenarios: shares could reach $312 if software growth accelerates and margins expand, or fall to $134 if AI coding tools disrupt IBM's software and infrastructure revenue. The brokerage noted that competitive risks to IBM's Z mainframe platform appear largely priced in, citing customer stickiness and data sovereignty requirements.