Lumen Technologies (LUMN)

Fundamental analysis

Lumen Technologies is an American telecommunications company from Monroe, Lousiana. Lumen offers communications and networking solutions, cloud solutions, and security solutions. The company owns fiber optic networks and spoken word transmission cables. It also owns data and cloud centers.

Lumen is a leading U.S. data communications provider. It owns an extensive network of fiber optic cables across the US. According to their own estimates, it would cost more than $150 billion to replicate their network. This is how they connect over 50 major US cities.

The company’s turnover was USD 13.7 billion for 2023. Gross profit was USD 6.8 billion. However, the net accounting income was a loss of USD 10.2 billion. The company overstated its value by reducing its profit by USD 10.6 billion. This transaction has no impact on the firm’s cash flow. Thus, it adjusted earnings by USD 3.21 billion in 2022. According to US accounting laws, if there is a large difference between a company’s valuation and its share value, the company must proceed with a revaluation relative to the share price. As the share price fell in Q2 2023, the subsequent accounting revaluation occurred.

In 2023, the company reduced its debt by $1.6 billion.

Results

In 2024:

The company extended its debt maturity to after 2029. It also secured $2.3 billion in new liquidity funding.

The firm was able to negotiate a strategic partnership with Microsoft. It will provide data center connectivity for AI using its fiber optic network.

Technical analysis

According to the moving averages, the company has been in a downtrend since the beginning of 2022, when the moving averages crossed closely.

The RSI follows the short-term trends on the stock, now in the neutral zone.

The price has fallen as low as $1 per share this year. (In 2016, it was well above $15 per share). This year’s positive news (especially after an unfavorable 2023) has seen the price rise hundreds of percent. Currently, Lumen is trading at more than $6 per share.

Volume is very low. Average volume is 35,000 shares per day.

Conclusion

Lumen belongs to the so-called utilities, i.e. companies providing common services to the masses (transmission and generation of electricity, water, gas, waste and internet and telecommunications). These companies are less correlated with the indices but more value retaining. In most cases they are a monopoly, oligopoly or generally a strong player in the market. Often they also own or exclusively manage the infrastructure in question.

Lumen owns its transmission cables, which gives it a physical advantage in providing its services. But that may not be all, if the results do not match it. And the fact that the company has reached a share price of $1 proves it. Now that Lumen seems to be doing better, it has room to grow further. Longer term, the company undoubtedly has advantages in owning its infrastructure. But that doesn’t mean it will thrive in the short term. The stock is still very volatile and further possible declines cannot be ruled out.