Is a recovery in the works for International Business Machines Corp. (NYSE: IBM)? Well if it is, then there needs to be some fundamental changes within Big Blue. That is the message from Credit Suisse, which does not see IBM making its recovery for some time. IBM investors should note that Credit Suisse has the lowest IBM price target and biggest downside expected of all firms on Wall Street.

Credit Suisse reiterated an Underperform rating for IBM with a $125 price target, implying a downside of 23% from current prices. The brokerage firm expects Big Blue to report its first-quarter financial results as $2.84 in earnings per share (EPS) on $19.8 billion in revenues. Consensus estimates call for EPS of $2.86 and revenue of $19.82 billion. IBM will report its earnings April 20.

A currency headwind of -7.4% is expected by Credit Suisse to affect the 2015 fiscal year total revenues, and an incremental -160 basis points headwind to total revenues since IBM last guided. Past this, the brokerage firm continues to believe that Big Blue faces a painful multiyear process that leads to a prolonged period of underperformance.

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During the investor briefing back in February, IBM guided to new “longer”-term objectives to grow revenues in the low single digits and EPS in the double digits. However, no time frame to return to this growth was provided, and Credit Suisse continues to see a difficult transition ahead.

In terms of IBM growing its segment revenues, Credit Suisse had this to say:

While we expect growth in its Strategic Imperatives, our concern is that to achieve the Core revenues target, there has to be an improvement from -11% in recent years to -2%, which seems unlikely given secular challenges in the hardware business and parts of the services/software as indicated in our note- Roadmap Blues dated 17 November 2014. While resetting expectations prior quarter was a positive, despite a forthcoming mainframe cycle, we remain concerned that the fundamental headwinds facing IBM are challenging.

Credit Suisse explained that four fundamental concerns remain:

• A weak order book and shrinking industrywide deal sizes cause revenue headwinds and margin pressures.
• Following a thorough analysis of its cloud, the firm believes it may ultimately be margin dilutive for IBM, even if it drives revenue.
• Restructuring becomes less effective.
• Evidence arises of significant internal turmoil and underinvestment.

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IBM has one of the largest stock buybacks of all time, and it is soon to even increase that buyback amount. It remains to be seen if IBM’s Internet of Things initiative can get much traction. It might not even matter that IBM is likely to be among those raising its dividend.

Shares of Big Blue were relatively flat at $162.64 just after the opening bell Wednesday. The 52-week trading range is $149.52 to $198.71. Note that the stock has a consensus analyst price target below the current price at $158.17.

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