To The Moon

Monumental Historic Past.

$IBM(IBM)$, this grand dame of technology stock has been around for ages, as far as I could remember.

It used to dominate the IT sector in the early days, with its fleet of mainframe (what is it, you may asked - Google it!) and mainframe engineers, that were looked upon like ‘demi gods’.

It was even freeze-frame in Hollywood movie “Hidden Figures” where the group of ingenious, pioneering lady “engineers” were able to get the IBM mainframe working, running on programming language, Fortran (FORmula TRANslation - a high-level, compiled, and general-purpose programming language, primarily known for its strong focus on numerical & scientific computing. (see above)

Then again, like any technology stocks or stocks for that matter, it did not manage to reinvent itself “fast” enough, especially with the (1) emergence of distributed computing and (2) the rise of the Personal Computer (PCs).

While newer languages like C and C++ flourished, it was the shift away from centralized hardware that truly challenged their reign.

It slowly receded from its absolute peak - being displaced by commodity hardware and open-source software environments, that also came and went.

Due to its unique and entrenched position especially in the Banking and Finance sector running COBOL on legacy systems, it chugged along, nicely, not generating any particular drama.

Well, not until recently.

The IBM-quake.

On Mon, 23 Feb 2026, Anthropic published tools that let Claude read, analyze and translate legacy COBOL into modern languages like Java and Python.

The Fall.

Immediately, IBM shares sank -13.2%, their biggest drop since 18 Oct 2000, with investors wiping roughly -$40 billion from IBM's market cap.

Besides being seen as the biggest single day drop in 25 years, analysts see the announcement as an existential threat to IBM's mainframe business. (see above)

With the decline, IBM shares have fallen -27% in February 2026 (alone), on track for its biggest one-month slide since at least 1968, according to data compiled by Bloomberg. (see above)

The reaction was swift. It was also built on a fundamental misreading of why enterprises run mainframes in the first place.

Historic Business Language.

IBM's COBOL is 66 years old.

It was designed in 1959, runs on IBM mainframes.

According to the Open Mainframe Project (OMP), this business processing language continues to power transaction processing systems with an estimated 250 billion lines of COBOL in active production.

What is OMP ?

• It is a 2015 Linux Foundation initiative, to promote open source software and Linux on mainframe systems, like IBM Z.

• It fosters collaboration among vendors, users, and developers to modernize mainframes for hybrid IT environments.

Engineers who wrote these lines of COBOL codes are retiring and incoming ‘replacement’ engineers; largely cannot or don’t know how to read it.

For decades, that skills gap has been one of enterprise IT's most expensive unsolved problems.

One that IBM has been working to fix with AI since at least 2023, when it launched watsonx Code Assistant for Z to help migrate COBOL to modern Java.

What Anthropic Says.

According to Anthropic, Claude Code can now:

• Analyze entire codebases.

• Map hidden dependencies.

• Generate working translations of code that most engineers today cannot read.

For enterprises running COBOL on distributed platforms (Windows, Linux and other non-mainframe environments), that capability is genuinely useful and increasingly practical.

Experts’ Opinions

(1) According to Gartner, Analyst, Matt Brasier:

• Modernizing COBOL has been a technically solved problem for a while,

• The real problem (as told to VentureBeat) is “costs of modernization” are high and return on investment (ROI) is low.

• Also, the issue runs deeper than market positioning.

• GenAI tools are helpful, but owing to AI’s inherent non-deterministic nature - resulting code is not consistent.

• Meaning, in the event that GenAI is given the same instructions twice, it might provide two different answers or pieces of code.

$Amazon.com(AMZN)$ and $Alphabet(GOOG)$ have been offering AI-powered COBOL migration tools for years.

AWS Transform and a comparable Google Cloud Platform service, both targeted the same problem: reducing friction for customers looking to move mainframe workloads to the cloud.

(2) According to Moody’s Ratings, Senior VP, Raj Joshi:

• “AWS & AWS Transform” is basically one more source of competition.

• IBM has always lived in a very competitive domain.

• On the margin, this thing is basically negative, no question about that.

• There's one more powerful competitor, but IBM has coexisted with these threats.

(3) NAND Research, Chief analyst, Steve McDowell also weigh-in, arguing:

• It is the hardware, not the code, that matters.

• Applications don't run on mainframes because they're written in COBOL.

• Companies do it because mainframes provide a level of (a) predictability, (b) power, and (c) reliability that standard servers cannot match.

MS’s new Price Target.

According to $Morgan Stanley(MS)$, Analyst Erik Woodring - IBM is facing a reassessment of its artificial intelligence risk with the release of Anthropic’s Claude Code.

Early in 2026, IBM shares held their value while other software stocks dropped.

The decline was driven by "vibe coding" as AI began replacing traditional development and service models.

That trend is changing now (for IBM), with Claude Code’s arrival.

As a result, MS has revised IBM’s price target to $247 from $304, citing extreme volatility across the peer group.

Objectively, MS has highlighted:

• Whether the new generative AI tools meaningfully threatens the IBM mainframe? 

• The importance to delineate between (a) access to tools to modernize off the mainframe, and (b) an enterprise’s desire to do so.

Like NAND Research Steven McDowell, Morgan Stanley recognized and emphasized that mainframe’s many benefits (“reliability, throughput, security, and cost) cannot be replicated elsewhere”.

They could even support massively complex AI workloads.

IBM stock price movement:

In the near term, market uncertainty will likely cause IBM’s stock to remain volatile and for a longer period.

The shares may not find a floor until investors see clearer catalysts of:

• Sustained software growth.

• Free cash flow upside.

• A key quantum breakthrough.

This is where a glimmer of hope (albeit a glowing one) shines once again on IBM, in the field of quantum computing.

Quantum Advantage.

The “Big Blue” has been researching quantum computers even longer than pure plays like $Rigetti Computing(RGTI)$ or $D-Wave Quantum Inc.(QBTS)$.

In terms of sales, it has (already) racked up more than $1 billion in orders for various quantum "tests, trials and explorations”. (see below)

More details.

Above is a comparison of sales and finances’ performances amongst the 3 US listed companies; heavily involved in quantum computing that many regarded as the next wave after artificial intelligence.

Data table is self-explanatory and provides a bird’s eye view, where each company stands in terms of quantum returns, when matched against each other.

Of course, things may change quickly in the tech world. Being the ‘early bird’ has its advantages as well.

Perhaps the most pertinent piece of information is IBM is working on a "fault-tolerant" quantum computer and expects to have a commercially viable option ready by 2029.

To note:

Based on industry ‘recognized’ standards - for a quantum computer to be commercially viable, it's estimated to (a) need at least 1 million physical qubits and (b) 99.99% two-qubit gate fidelity (and probably closer to 99.99999%).

When that happens, it will be “all hell break loose” because it will finally signify the arrival of quantum computing, that may even mount a challenge to a then ‘more’ matured AI-existence. Agree ?

Financial Advantage.

Besides its quantum ‘lead’, IBM is to a certain extent a financial powerhouse.

(1) Revenue and Growth Momentum.

IBM's recent performance indicates a steady upward trajectory, outperforming broader market benchmarks in several key areas.

• Revenue increased by +4.5% over the past 12 months to reach $65 billion.

• Quarterly revenue recently recorded at $16 billion, reflecting a +9.1% YoY growth.

• It actually surpassed S&P 500's 7.5%.

• With a more diversified business, IBM's earnings are growing north of 7% annually.

• These are not numbers that reflect a business collapsing under competitive strain.

(2) Profitability and Cash Flow Generation

The core of IBM’s financial strength lies in its ability to convert revenue into significant liquid returns.

• It has earned $10.6 billion in profit over the past year and generated even more free cash flow (FCF), coming in at $11.6 billion.

• Operating cash flow margin stands at 20.6%, nearly aligning with the broader market.

• IBM is (significantly) more financially viable than RGTI and QBTS combined.

(3) Balance Sheet and Financial Health

While the company maintains a massive cash reserve, its debt levels remain a specific point of interest for long-term monitoring, for rational investors.

• Its balance sheet is worthy of further examination.

• With $15 billion in cash and a cash-to-assets ratio of 10.2% (well above the market's 7.2%), IBM possesses substantial financial flexibility.

• Debt is at -$67 billion against a market capitalization of approx $240 billion.

• This works out to be 31.6% for its debt-to-equity ratio; higher than the S&P 500's 20.2%—an aspect that investors will need to monitor.

(4) Valuation and Investor Outlook

Despite not being a "pure play" high-growth stock, the valuation suggests a stable, defensive investment.

• Priced at 22.6x trailing earnings and a price-to-free-cash-flow ratio of (only) 20.6, and a 2.6% dividend yield.

• IBM may not be the sexiest way to invest in quantum computing, but to any rational investor, it looks like one of the safest.

Latest.

After the sharp -13.2% drop on 23 Feb 2026, Wall Street realized the panic over Anthropic’s Claude Code was an overreaction.

IBM’s stock price recovered well, gaining a total of +8.13% between Feb 24 - 26, reflecting a positive shift following earlier market fluctuations.

Technically, where is IBM heading ? (see below)

As of 26 Feb 2026 closing

Simple Moving Averages (SMA).

• IBM’s 26 Feb 2026 closing price ($242.01) is below its SMA of 20-day ($275.13), 50-day ($290.71) and 200-day (280.08).

• Given its upwards momentum over the past 3 days, it should hit its first resistance level at $246.68.

MACD.

• IBM’s MACD line (-16.57), is well below Signal Line (-11.66), with both indicators remain firmly below the Zero line.

• This reflects a persistent underlying downtrend and notable weakness in NFLX's current trajectory.

• Stock price is still experiencing a ‘technical’ breakdown, characterized by significantly expanding negative momentum as the gap between the MACD and Signal line widens.

• Lastly, “negative” divergence (-4.91) indicates that downward momentum is actively strengthening rather than slowing down, implying a price floor has yet to be established.

RSI.

• With a RSI of 32.60, this places IBM in a near ”oversold" state, reflecting the extreme selling pressure seen during the week of 23 Feb 2026.

• Past 3 days of relief rally is considered a technical "snap-back", with no real meaning.

• A sustainable recovery can only be declared when RSI climbs back towards a reading of 50.

• Current “32.60” also suggests that most of the "easy money" for short-sellers has already been made.

Until then, IBM is still undervalued on a momentum basis, without an equally momentous catalyst to turn that value into a rapid vertical recovery.

Not Doom & Gloom.

In case above technical indicators seems all too gloomy, it is not as dire.

IBM has all the history to back this up.

2022 - IBM vs S&P 500

During 2022 inflation shock, IBM dropped -20.2% from peak to trough vs the S&P 500's +25.4%. Miraculously, it fully recovered by November 2022. (see above)

In the COVID crash, IBM plummeted by -39% but managed to bounce back by late 2022.

Even during the 2008 global financial crisis, IBM also rebounded by December 2009, significantly ahead of the broader market's recovery.

Time and again, IBM has consistently demonstrated its ability to absorb shocks and recover and it is not about to change anytime soon.

As an investor will you risk it and buy IBM now OR will you wait patiently (like me) to avoid catching a falling knife ?

Post notes:

• With the start of the US/Israel ‘invasion’ of Iran, IBM like other US stocks have taken a tumble when trading resumed on Mon, 02 Mar 2026.

• At $239.37 /share (2.39% off its trough price of $233.78), it has become even more ‘affordable’ and ‘attractive’ a considerations. Hmm….

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• Do you think IBM’s gains over the last 3 days was just a temporary "relief rally"?

• Do you think Anthropic Claude Code launch will slowly chip away at IBM’s COBOL business that is still a core revenue source, after all these years ?

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