IBM was downgraded on Monday amid warning bells that the computing giant is struggling to garner growth in the cloud and Software-as-a-Service (SaaS) field.
According to Barclays Capital analyst Ben Reitzes in a note to analysts, the mainframe "catalyst" is over, leaving IBM's traditional server business in trouble. But, the positive benefits from analytics, which the company is expanding into, will be offset by "secular" shifts to the cloud and SaaS.
Reitzes said this shift "seem[s] to adversely impact all of IBM's segments in some way."
As a result, Barclays is lowering its price estimate down 12 percent down from $215 to $190.
Shares in IBM have been tumbling since the start of this year. Though it recovered on the most part from an 11 percent drop in April from $212 to $187 per share, the company's stock has taken a slow and prolonged battering since.
"It is increasingly clear to us that investors will evaluate IBM on cash flow more than earnings until revenue starts to grow meaningfully," Reitzes wrote. It follows surveys conducted by the bank that suggests the "disruptive impact of cloud and SaaS" have only just begun, and will likely see a shake-up of the entire industry in the coming year.
A few pointers from the note:
Barclays' bottom line: "We are more concerned about all our names in “old tech” and believe that IBM’s shares may remain range bound."