IBM faces these big headwinds: Analyst

IBM's earning expectations

IBM will release earnings after the bell Monday, and investors should expect heavy pressure on revenue from currency headwinds, Morningstar's Peter Wahlstrom said.

"Everyone's going to be looking past revenue because the company has at least a 7 percent [foreign exchange] headwind," said Wahlstrom, director of technology, media and telecom at Morningstar. "And when you dive in to a couple of the different segments for IBM, each one them is going to feel pressure, whether it's on the services side, the software side or the hardware side,"

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IBM's core business—hardware and software—remains under pressure from the migration into cloud computing, Wahlstrom said in an interview with CNBC's "Tech Bet."

"As the cloud continues to gain adaption and traction in the marketplace, there's the risk that the level of complexity actually reduces and there's no need or less need for IBM's services, hardware and software," he said.

Wahlstrom still sees some bright spots, including the company's $3 billion investment in the emerging global trend of the Internet of Things.

"It should have a pretty decent value proposition in our view. However it's going to take some time for some of the [Internet of Things] initiatives to really make it in the numbers," Wahlstrom said.

Wahlstrom views the stock as fundamentally undervalued, but he says it's going to take time to normalize.

"You'd need to see acceleration in the strategic initiatives over the next couple of years to get the stock moving," Wahlstrom said.

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