IBM Shares Remain Undervalued Despite Summer Slump

IBM shares have taken a hit this summer, declining by 10% since May. Despite this downturn, analyst Frank Brennan believes that IBM remains a buy, citing its robust profitability and free cash flow.

The company's Q2 results were soft, with revenue nearly flat and a lowered FY 2026 outlook. However, these metrics do not change the fact that IBM offers an attractive earnings-based valuation, with a yield of 2.98% and a fair value estimate of $281, implying a 23% upside.

Brennan notes that technical trends are bearish ahead of Q3 earnings, but he believes that the lowered bar and strong free cash flow make IBM a decent value for patient investors.