Is Kyndryl Holdings (KD) Fairly Valued As Its Broadcom Alliance Expands VMware Cloud Services?

Kyndryl Holdings alliance news and why it matters for stock watchers

Kyndryl Holdings (KD) has expanded its alliance with Broadcom to provide end-to-end consulting for VMware Cloud Foundation. The move focuses on AI-ready private clouds, security, automation and skills investment for several thousand consultants.

For context, Kyndryl Holdings’ share price is at US$13.20, with a 7 day share price return of 3.53% and a 90 day share price return of 4.76%. This contrasts with a year to date share price return that is down 48.22% and a 1 year total shareholder return that is down 58.48%, suggesting recent momentum is improving from a weak longer term base as investors weigh news like the Broadcom alliance against earlier concerns.

Compare how Kyndryl Holdings stacks up against other AI infrastructure opportunities by scanning the carefully curated 56 AI infrastructure stocks.

For Kyndryl Holdings, the share price has fallen sharply over the past year while analysts and intrinsic value estimates still sit higher. After the Broadcom news and recent rebound, where does fair value actually line up against US$13.20?

Most Popular Narrative: 6.4% Undervalued

The most followed valuation narrative puts Kyndryl Holdings’ fair value at $14.10, slightly above the recent $13.20 share price, and ties that gap to specific profit and cash flow assumptions.

The analysts have a consensus price target of $14.1 for Kyndryl Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.5, and the most bearish reporting a price target of just $13.0.

Read the complete narrative. Read the complete narrative.

Want to see what sits behind that $14.10 figure rather than just the headline? The narrative focuses on faster earnings growth, firmer margins, and a lower future earnings multiple than many IT peers. Curious how those pieces fit together into a discounted cash flow view using a 12.46% rate and flat revenue assumptions?

Result: Fair Value of $14.10 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Kyndryl Holdings still faces meaningful risks, including pressure from legacy, lower margin contracts and potential volatility in revenue if large renewals or deals are delayed.

Find out about the key risks to this Kyndryl Holdings narrative.

Another view on Kyndryl Holdings valuation

The analyst narrative and community fair value put Kyndryl Holdings at around $14.10, only slightly above the current $13.20 share price. Yet Simply Wall St’s DCF model suggests a future cash flow value closer to $19.77, which points to a much larger gap. Which story do you think is closer to reality?

For readers who want to see how that cash flow based estimate is built step by step, the SWS DCF model is fully laid out in one place: Look into how the SWS DCF model arrives at its fair value.

Next Steps

Given the mix of concerns and optimism around Kyndryl Holdings right now, it makes sense to move quickly and test the data for yourself. To weigh up both sides of the story using the same risk and reward flags other investors are watching, start with these 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Kyndryl Holdings?

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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.

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