Why Lumen's Impressive Rally May Be Running Out Of Steam (Archive)
Lumen’s valuation looks frothy as bullish momentum stalls against mounting revenue and leverage headwinds.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- Lumen Technologies is executing a turnaround, pivoting from legacy telecom to data center network infrastructure for hyperscalers via long-term PCF deals.
- LUMN has secured over $10 billion in PCF contracts, but revenue growth from these deals is not expected until late FY28, while legacy business declines persist.
- Leverage remains a key risk, with net debt/EBITDA at 7.6x; planned divestitures may reduce this, but EBITDA interest coverage ratios may remain under pressure.
- LUMN trades at a rich EV/EBITDA multiple, and the stock's recent rally is driven by multiple expansion despite declining EBITDA expectations, which is indicative of hype.
- The bullish advances on LUMN vs SPX500 are seeing a pause at a key monthly resistance level.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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