Barron's: 2/10/26 -
- Kyndryl Holdings shares plunged 55% to $10.59 after multiple executive departures and an SEC review of accounting practices.
- Guggenheim Partners downgraded the stock to Neutral, citing unanswered questions and weak fiscal third-quarter results.
- The company cut its fiscal 2026 revenue outlook to a 2% to 3% decline and reduced free cash flow guidance to $350 million.
Kyndryl’s future is too uncertain for investors to feel comfortable, according to Guggenheim Partners.
If there is one thing investors dislike most, it is uncertainty. Kyndryl Holdings’ future now looks more uncertain than ever after a historic selloff on Monday, analysts say.
Shares of the IT infrastructure company plunged 55% to $10.59 after Kyndryl announced the departures of Chief Financial Officer David Wyshner, General Counsel Edward Sebold, and Global Controller Vineet Khurana. The company also disclosed that it is reviewing its accounting practices following voluntary document requests from the Securities and Exchange Commission.
Guggenheim Partners downgraded Kyndryl stock to Neutral from Buy and withdrew its price target. In a research note, analyst Jonathan Lee said the announcements, combined with weak fiscal third-quarter results, raised more questions than answers.
The stock rebounded 5.3% on Tuesday to $11.15.
Lee said investors likely anticipated a weak earnings report from the former IBM spinoff but were unprepared for the abrupt exit of key legal and financial executives or the disclosure of material weaknesses in internal controls over financial reporting. The SEC review, in particular, is expected to remain an overhang on the stock.
Kyndryl said it is developing a remediation plan but offered no details, noting that additional information would be provided in a delayed quarterly securities filing.
“We expect investors to continue questioning execution and credibility until management provides an update on material weaknesses,” Lee wrote.
The company’s updated guidance also failed to reassure investors. Kyndryl now expects fiscal 2026 revenue to decline 2% to 3%, compared with a prior forecast of 1% growth. It also cut its midpoint free cash flow forecast to $350 million, down from $550 million.
According to Lee, the revised outlook casts doubt on Kyndryl’s long-term goal of generating $1 billion in adjusted free cash flow by 2028. Restoring confidence in that target will require a credible management team capable of executing a turnaround.
For now, analysts recommend caution. J.P. Morgan double-downgraded Kyndryl to Underweight from Overweight, and Oppenheimer cut its rating to Perform from Outperform.
https://www.barrons.com/articles/kyndryl-stock-downgrade-accounting-review-7245a725