Key Points
Technology consulting, services, and support outfit Kyndryl gave investors a pretty good scare earlier this month, indicating some of last year’s reported results may have been wrong.
Today, however, the company confirmed those original numbers were indeed correct.
The market isn’t ready to completely forgive and forget just yet, keeping KD stock nearer its low price -- and low valuation -- reached when the warning was first issued.
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It would be easy to assume it was something within Kyndryl's (NYSE: KD) third-quarter numbers posted on Tuesday that's catapulting its stock. But, that's not quite it. Rather, KD stock is up 10.3% as of 11:31 a.m. ET today mostly because the technology company confirmed that corrections to a handful of quarterly results filed with the SEC in 2025 wouldn't need to be made. Investors are simply celebrating that Kyndryl is doing exactly as well as they were first led to believe it was doing all of last year.
Never mind
Kyndryl's management didn't offer much in the way of details back on February 9th, when it first postponed filing its official quarterly results and cautioned shareholders that it "anticipates reporting material weaknesses in the Company's internal control over financial reporting for the period covered in the Quarterly Report, as well as for the full fiscal year ended March 31, 2025, and the first two fiscal quarters of fiscal year 2026." Investors panicked in response to the sudden uncertainty, more than halving the stock's price that very same day.
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Now, as it turns out, none of the previously reported numbers were wrong. After reviewing the financial reporting controls in question, Kyndryl refiled those same quarterly results today, noting "there has been no restatement of current period or any previously reported financial statements." Its slow but steady year-to-date fiscal progress suggested earlier this month remains fully intact.
One or the other, but not both
The company may have sidestepped an accounting calamity. But, investors obviously aren't quite ready to fully restore the stock's pre-stumble value; KD shares are still trading more than 40% beneath their pre-plunge price. A broader rethinking of artificial intelligence-related stocks' valuations in the meantime -- which would certainly impact Kyndryl -- may be the culprit.
Even so, with this now-consistently profitable company's stock currently priced at less than ten times its projected per-share earnings, there's a value argument to be made here. There's just not much of a growth argument. Make sure you know which one you really want before diving in.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kyndryl. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
