IBM may suffer from decelerating revenue growth and changing economic cycle dynamics that could make matching its recent outperformance harder, Morgan Stanley warned Wednesday. Analyst Erik Woodring downgraded the stock to equal weight from overweight. He also cut his price target by $4 to $148, which implies upside of just 1.9% from where the stock closed Tuesday. “Should our 2023 Industry Outlook prove correct, and early cycle dynamics emerge in mid 2023, we see risk to outperformance given the stock is trading near-record highs and IBM historically underperforms IT Hardware and its peers in an early cycle environment,” Woodring said in a note to clients. The stock dipped 1.9% in Wednesday premarket trading. It has gained 3.1% since 2023 began after climbing 5.4% in 2022, while the S & P 500 lost 19%, and the broader tech sector got battered by higher rates. Woodring said one of the biggest challenges facing the company is revenue growth, as he wonders if IBM can achieve its goal of expanding constant currency revenue by 4% to 6%. He expects the company to come in slightly below that goal of 3.5% growth, as 2022 tailwinds become headwinds and the company feels moderation in business units like consulting. Woodring also said a large-scale merger or acquisition has been left open as a possibility, though that doesn’t mitigate concerns for how the company will perform in 2023. On top of that, Woodring said looking at the company’s historical performance does not garner enthusiasm. He said the stock typically underperforms early in cycles and outperforms later in them due to its defensive model. That could mean trouble ahead given Woodring believes the current late-cycle period is about 75% over and a new early cycle is due in early or mid 2023. In the nearer term, he raised expectations for fourth-quarter earnings due to improved foreign exchange . Woodring said management will likely focus on 2023 revenue growth guidance and the company’s three-year goal for free cash flow when reporting Jan. 25. He said a report that’s in line with expectations and initial revenue guidance within the expected range could result in a neutral or positive increase in shares. — CNBC’s Michael Bloom contributed to this report.