Lumen Technologies Stock To $7?

Lumen Technologies (LUMN) stock has jumped 16% during the past day, and is currently trading at $9.36. Our machine-driven multi-factor assessment suggests that it may be time to sell LUMN stock. We have, overall, a pessimistic view of the stock, and a price of $7 may not be out of reach. We believe there are several things to fear in LUMN stock given its overall Very Weak operating performance and financial condition. Hence, despite its Very Low valuation, we think that the stock is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $9.3 Bil in market cap, Lumen Technologies provides integrated communication products and services across business and mass markets, serving approximately 4.5 million broadband subscribers through multiple brand offerings.

[1] Valuation Looks Very Low

This table highlights how LUMN is valued vs broader market. For more details see: LUMN Valuation Ratios

[2] Growth Is Very Weak

• Lumen Technologies has seen its top line shrink at an average rate of -12.2% over the last 3 years
• Its revenues have fallen -6.5% from $14 Bil to $13 Bil in the last 12 months
• Also, its quarterly revenues declined -5.4% to $3.1 Bil in the most recent quarter from $3.3 Bil a year ago.

This table highlights how LUMN is growing vs broader market. For more details see: LUMN Revenue Comparison

[3] Profitability Appears Weak

• LUMN last 12 month operating income was $412 Mil representing operating margin of 3.2%
• With cash flow margin of 34.2%, it generated nearly $4.4 Bil in operating cash flow over this period
• For the same period, LUMN generated nearly $-1.2 Bil in net income, suggesting net margin of about -9.2%

This table highlights how LUMN profitability vs broader market. For more details see: LUMN Operating Income Comparison

[4] Financial Stability Looks Weak

• LUMN Debt was $18 Bil at the end of the most recent quarter, while its current Market Cap is $9.3 Bil. This implies Debt-to-Equity Ratio of 194.2%
• LUMN Cash (including cash equivalents) makes up $1.6 Bil of $33 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.8%

[5] Downturn Resilience Is Very Weak

LUMN has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• LUMN stock fell 93.6% from a high of $15.28 on 9 June 2021 to $0.98 on 1 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $10.12 on 11 November 2024 , and currently trades at $9.36

 
2020 Covid Pandemic

• LUMN stock fell 42.7% from a high of $15.16 on 12 February 2020 to $8.69 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 27 January 2021

 
2008 Global Financial Crisis

• LUMN stock fell 56.0% from a high of $49.52 on 6 July 2007 to $21.81 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read LUMN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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