LUMN - Lumen: Attractive Speculative Setup (Rating Upgrade)

2024-05-31 13:25:51 ET

Summary

• Lumen Technologies has improved its recovery prospects by extending debt maturities and by confirming a positive free cash flow forecast for the current year.
• The company's broadband business, particularly fiber, is experiencing strong momentum and contributing significantly to revenue.
• Lumen's success in pushing out maturities has caused a stabilization of the telecom's share price.
• At 6.5X FCF, at the mid-point of guidance, I see a promising risk profile for speculative investors.

One reason I recommended to sell Lumen Technologies ( LUMN ) last year was that the telecommunications company burned through a considerable amount of its equity as it repositioned its business and sold off assets. However, most recently, Lumen has managed to extend a considerable amount of its debt maturities and the company confirmed a positive free cash flow forecast for the current year, in part because of its fast-growing broadband business. Although Lumen will remain a highly speculative and volatile stock going forward, I believe the recovery prospects have improved here lately!...

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