5. Kyndryl Holdings, Inc. (NYSE:KD)
Greenlight Capital’s Stake Value: $113.16 Million
Number of Hedge Fund Holders: 33
Kyndryl Holdings, Inc. (NYSE:KD) is a company that provides technology and IT services. They offer cloud services, core enterprise services, applications, data services, and artificial intelligence services. Amid the artificial intelligence frenzy and growing demand for cloud computing solutions, it is turning out to be one of the best stocks to buy, according to billionaire David Einhorn.
Kyndryl Holdings, Inc. (NYSE:KD) is up by over 76% for the year, benefiting from solid financial results and growth trends affirming long-term prospects. While revenue was down by 7.4% in the fiscal second quarter, Signings for Kyndryl Consult grew 81% year over year. Kyndryl Holdings, Inc. (NYSE:KD) also posted $260 million in sales to cloud hyperscaler customers. It is also on track to hit its hyperscaler revenue target of nearly $1 billion in the current fiscal year.
The stock’s sentiments have also received a significant boost amid expectation that the company is slowly inching to profitability. Kyndryl Holdings, Inc.’s (NYSE:KD) net loss in the fiscal second quarter narrowed to $43 million from $142 million a year ago. The company’s profit margins are showing signs of improvement as more enterprises desire to implement AI-powered applications and services.
Kyndryl Holdings, Inc. (NYSE:KD) is experiencing some AI-related momentum, as evidenced by the robust growth of its consulting division and sales linked to alliances with cloud hyperscalers. Given the improving margins and the possibility that sales will resume growth in the upcoming fiscal year, the stock may still have room to rise.
Rewey Asset Management stated the following regarding Kyndryl Holdings, Inc. (NYSE:KD) in its Q3 2024 investor letter:
“We continue to see significant neglect and undervaluation in shares of Kyndryl Holdings, Inc. (NYSE:KD), a position that shows 94% upside to our AFV price target of $44.60 per share.
Kyndryl is a $5.5 billion market cap designer, builder, manager, and modernizer of mission critical, i.e., backbone, information technology infrastructure systems, including public, private, and multi-cloud environments. KD was spun out of IBM in November of 2021. Since the spin, KD has been aggressively repositioning its business by shedding unprofitable legacy IBM driven contracts, partnering with leading technology companies including MSFT, GOOGL, AMZN, SAP, VMW, ORCL, etc., signing new contracts at significantly higher margins, and optimizing its cost structure. Today’s KD bears little resemblance to its pre-spin form where IBM neglected profits in the unit to secure large hardware sales in separate divisions.
KD has maintained a very strong financial profile through its transition and has ample financial flexibility as it moves forward to a future that is likely to show strong revenue, earnings and free cash flow growth. KD’s net debt is very reasonable at $1.97 billion ($1.26 bil. cash, $3.24 bil. debt), approximately 79% of FY2025 expected EBITDA. KD’s financial strength is further amplified by its investment grade rating at all three agencies, and as it has not drawn down any of its $3.15 billion revolver…” (Click here to read the full text)
