Lumen Technologies stock surges 240.9% YTD, benefiting from AI demand, but faces legacy challenges

From Nasdaq: 2024-12-11 08:02:00

Lumen Technologies, Inc’s LUMN shares have surged 240.9% YTD, outpacing the S&P 500 and sub-industry growth. The stock closed at $6.23, 39.7% below its 52-week high. Lumen is benefiting from AI-driven demand for its PCF solutions, securing $8 billion in new sales since June 2024 through collaborations with Google Cloud, Amazon, and Meta Platforms.

Lumen’s IP and Wave sales are up YTD, with plans to expand services. The company raised its 2024 free cash flow guidance to $1.2-1.4 billion. Cost savings initiatives aim to save $1 billion by 2027. Lumen’s Quantum Fiber business shows promise, with plans to reach 500,000 enabled locations in 2024.

Despite positive momentum, Lumen faces headwinds in legacy business and higher costs. Analysts are optimistic about the stock, with improving earnings estimates. LUMN trades at a discounted valuation compared to the industry. However, concerns over debt levels and legacy business performance persist.

Lumen’s outlook remains cautious due to legacy business challenges and increased costs impacting margins. The company expects EBITDA to decline in 2025 but rebound in 2026. With a Zacks Rank #3 (Hold), the stock may not be a prudent short-term investment option. Long-term investors and stakeholders may find value in holding the stock.

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Read more at Nasdaq: Lumen Surges 241% YTD: Will the Stock Sustain Momentum in 2025?