IBM stock had its worst day in 26 years. Why does Wall Street believe in 45% growth?

Analysts expressed support for IBM, one of the world's oldest and largest technology companies, after its shares posted their strongest single-day drop since 2000. Investors were concerned that a new AI feature from startup Anthropic could pose a threat to IBM's programming languages, CNBC wrote. However, Wall Street sees IBM as a stable player whose position is too strong to be destroyed by a single AI release, Barron's said.

The selloff in IBM securities began after Anthropic announced the Claude Code tool. By the end of the session on February 23, IBM's forward P/E (price-to-earnings) ratio had fallen to 17.82, the lowest level since August 2024, Barron's cited Dow Jones Market Data. However, the stock began to rebound as early as Feb. 24, rising 2.7% by the end of the trading day as investors began to come around, the publication noted.

Claude Code is able to automate the modernization of COBOL, the decades-old programming language that still powers most ATM and bank card transactions, Barron's writes. Anthropic claims that updating that code - a task traditionally considered IBM's "domain" - can now be accomplished "in quarters instead of years."

This potentially undermines IBM's main source of revenue, Barron's clarifies. IBM's COBOL-powered mainframe revenue jumped 48% in the fourth quarter of 2025, its best result in 20 years.

- Jefferies analyst Brent Till cautioned against placing too much importance on IBM's stock collapse, CNBC writes. "We view this sell-off more as a short-term pressure on sentiment toward legacy services rather than an existential or structural risk," Till said.

- Evercore ISI analyst Amit Daryanani also called the sell-off "unwarranted" and recommended buying the stock on the downturn. "The idea of abandoning mainframes is not new," he noted. - IBM clients have had plenty of opportunities to migrate away from that platform, but they are staying on it because of its unique advantages," he said(quoted by MarketWatch).

Daryanani added that IBM itself offers modernization tools, including its own AI assistants. That said, IBM's mainframe, the z17, remains popular because customers value 100 percent uptime, quality encryption and cost efficiency, MarketWatch reported.

- Melius Research analyst Ben Reitzes said the collapse was overblown and emphasized that he expected IBM to be able to "dodge the AI apocalypse." "After a strong fourth-quarter report, the market narrative is fixated on the AI threat to consulting and even software," Reitzes said, recalling that consulting accounts for about 30 percent of IBM's sales(citing Barron's).

He pointed out that Amazon has been promising to use AI to transfer customers from mainframes for over a year now, and no one was paying attention - but when Anthropic announced it, the market panicked.

- On the other hand, billionaire Bill Gross mentioned IBM among the stocks he is "staying away from," along with Oracle and Microsoft. He advised investors to "be satisfied with single-digit returns," mentioning companies such as Western Midstream Partners (natural gas and oil), Verizon Communications and AT&T (telecom operators), and the Vanguard FTSE All-World ex-US Index Fund (VEU, an exchange-traded fund for stocks outside the U.S.).

Wedbush analyst Dan Ives, following other experts, called the selloff excessive and reiterated an Outperform rating for IBM shares and a target price of $340, StreetInsider.com writes. This implies a 45% increase from the closing level on February 24.

At the same time, Ives removed IBM stock from Wedbush's "Best Ideas" list, citing the firm's investment discipline protocol, TipRanks notes. When a security falls too far (as IBM did by 13%), investment firms' internal rules often require that it be removed from "recommended for immediate purchase" lists to minimize risk in a portfolio. However, IBM stock remains a member of the Ives AI 30 Index (the top 30 AI companies according to Ives).

According to MarketWatch, the majority of analysts maintain a rather positive view on IBM shares: 13 experts recommend buying the company's securities. Another seven recommend holding the stock, while three are more cautious and recommend selling.

This article was AI-translated and verified by a human editor