TD Cowen analyst Gregory Williams maintained a Hold rating on Lumen Technologies (LUMN – Research Report) today and set a price target of $3.50.
Geoff Meacham has given his Hold rating due to a combination of factors surrounding Lumen Technologies’ current financial situation and future prospects. The company’s fourth-quarter results for 2023 were strong, particularly in the Public Sector, and they managed to exceed both TD Cowen’s expectations and the consensus on the Street for revenue and EBITDA. However, despite this positive performance, Lumen faces challenges ahead, such as increased capital expenditures and taxes that are expected to lead to reduced free cash flow. Additionally, while the company has extended its debt maturity with bondholders to beyond 2029, there’s still uncertainty regarding their next-generation products and the goal to stabilize revenue by the end of 2025 is considered premature to assess at this stage.
Furthermore, the Indirect Local Exchange Carrier (ILEC) divestiture remains a variable with uncertain outcomes, and while a potential sale could help with de-leveraging, it must be accretive to be considered beneficial. The company’s guidance for 2024 indicates a slight year-over-year decline in EBITDA on an organic basis, even though management has set a good midpoint target. There’s also the potential for a legislative change that could benefit Lumen financially. Segment-wise, improvements are visible across the board, with Public Sector showing early signs of stabilization and Mid Markets potentially following, though customer churn and timing for stabilization remain unclear. In Mass Markets, fiber additions fell short of expectations despite recent acceleration, adding to the cautious outlook that informed Meacham’s Hold rating.
In another report released on February 5, Barclays also maintained a Hold rating on the stock with a $47.00 price target.
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Lumen Technologies (LUMN) Company Description:
Lumen Technologies is a technology and communications company focused on providing business and mass markets customers. It offers public and private cloud solutions, Colocation and Data Center Services, IT solutions, Unified Communications and Collaboration, Content Delivery, and Managed Security Services. Lumen operates through three brands, including its flagship brand Lumen targeting the enterprise and wholesale markets. Further, it provides fiber-based services to residential and small business customers via the Quantum Fiber brand. Moreover, it focuses on the mass market through its CenturyLink brand.
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