International Business Machines Corp. (NYSE: IBM) delivered nothing short of a total stink bomb in its third-quarter earnings report. Things are bad enough that the company finally dropped its ambition of $20 in earnings per share by the end of 2015. And now things are so bad that at least the first argument can be made that the direction of the company under Ginni Rometty is one that could get her ousted.

Most analysts have lowered price targets and expectations for IBM. The news was bad enough that it spilled over into five major tech stocks on Monday. Analysts were already cautious ahead of the third-quarter earnings debacle, but one analyst report really stood out. Credit Suisse already had an Underperform rating on IBM, but the firm slashed the price target to $125 from $160.

What investors need to understand in this call is that $125 represents almost another $45 in downside from Monday’s closing price, and that is after IBM’s stock fell almost $13 on Monday alone. Here is what else stands out now: after looking at the Thomson Reuters universe of price targets, IBM’s lowest price target ahead of this was already $160. That means that Credit Suisse’s prior target was at the lowest point — and now the firm sees the stock heading to as low as $125!

Credit Suisse’s Kulbinder Garcha, the analyst behind the lower price target, basically called this the end of the road and a major reset for IBM. He lowered the firm’s earnings estimates by 10% for 2014 and by 23% for 2015, down to $16.16 per share and $15.24 per share, respectively.

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Garcha did try to maintain that much of the negativity is now reflected in IBM’s stock. Still, there are many warnings that support the much lower price target that is the lowest analyst target on Wall Street. He said:

We believe resetting expectations is a positive, and secular issues are now being increasingly reflected in shares. Nevertheless, despite a forthcoming mainframe cycle, we remain concerned that the fundamental headwinds facing IBM are challenging and accelerating. We also believe abandoning the long term earnings per share roadmap is the correct move, but may require a fundamental reassessment of the strategy. We see a combination of declining organic revenues (about 6% in 2014), in the context of easing comparisons, and weak free cash flow conversion.

The takeaway here is that Garcha believes resetting expectations is a positive, and secular issues are now being increasingly reflected in shares. Still, that did not prevent him from setting the lowest price target on Wall Street, after already having previously having the lowest target. Despite a forthcoming mainframe cycle, Garcha remains concerned that the fundamental headwinds facing IBM are challenging and accelerating. While abandoning that $20 in earnings per share was viewed as the correct move, Garcha is worried that the new direction may require a fundamental reassessment of the strategy.

Another caution is that the organic issues are in focus in this negative report from Credit Suisse. Garcha said:

We see multiple issues in IBM results. First, services backlog was down 7 percent and 3Q margins came in at 17.7% percent the lowest level in 2 years, breaking consistent improvement. Second, software revenues were down 2% as reported and more organically. IBM continues to face multiple issues to revenue growth including high mainframe exposure, negative cloud impact and weak IT spending.

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The firm now expects that revenue will be down 5% in 2014 to $94.4 billion and down another 7% to $88 billion in 2015. Garcha projects free cash flow on a standard definition of $11.6 billion in 2014 and $12.3 billion in 2015, and he continues to flag that conversion is running at 76% and 87% — even allowing for the improvement in cash tax headwind.

Again, this is the worst of all formal analyst targets. Mid-morning Tuesday, IBM shares were down another 4%, or almost $7 more, to $162.10, and we had already seen more than 9 million shares trade hands. The average daily volume is only 3.4 million shares, but trading volume was over 23 million on Monday.

As far as how bad this is, Monday’s lows were already right at three-year lows. Tuesday is even lower than that, and IBM shares had a low of $161.68 when this was published.

Other analyst calls were as follows:

• Barclays maintained its Equal Weight rating but cut the target to $160 from $180.
• IBM was downgraded to Hold from Buy at Evercore.
• Jefferies maintained its Underperform rating but cut the target to $144 from $163.
• Wells Fargo maintained its Market Perform rating but lowered its price valuation range to $167.00 to $177.00 from the prior range of $185.00 to $195.00, based solely on 10 times expected 2015 earnings.

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