Lumen Technologies, Inc.

LUMN Details

Lumen Technologies, Inc. (NYSE: LUMN) operates as an integrated communications company that offers its residential and business customers a wide variety of communications services. LUMN's 450,000 route miles of fiber optic cable networks serve customers in more than 60 countries. As of June 30, 2021, LUMN serves 4.67 million broadband customers under the Mass Market segment.

Latest News:

• Expansion of Partnership: On October 25, 2021, LUMN and Cisco Systems, Inc. expanded their agreement to include Lumen Solutions for Cisco Unified Communications Manager Cloud to assist businesses in upgrading to the latest advanced collaboration solutions. This new product combines Cisco's most advanced cloud-based collaboration capabilities with LUMN's worldwide fiber network dependability and speed, making it an excellent solution for enterprises that have already invested in Cisco Webex or considering it.
• Network Modernization Contract by USPS: On September 28, 2021, the United States Postal Service (USPS) chose LUMN to enhance and modernize its network services, which support more than 32,000 post offices and mail processing locations across the country.
• Payment of Dividend: On August 19, 2021, the company declared a quarterly dividend of USD 0.25 per common share, paid on September 10, 2021, to shareholders of record on August 30, 2021.

Q2FY21 Results:

• Decline in Topline: The company reported a decrease of 5.16% in operating revenue to USD 4.92 billion in Q2FY21 (ended June 30, 2021) compared to USD 5.19 billion in Q2FY20.
• Growth in Profitability: Net income for Q2FY21 grew 34.22% YoY and stood at USD 506 million compared to USD 377 million in Q2FY20.
• Cash and Debt Position: As of June 30, 2021, the company's cash balance stood at USD 935 million, with a total debt of USD 31.17 billion.
• Share Repurchase Program: Effective August 03, 2021, LUMN authorized a USD 1.0 share repurchase program to buy back its common shares in the open market or privately negotiated transactions for a period of 24 months.

Key Risks:

• Competition Risk: LUMN operates in the highly competitive communication industry. In recent years, fierce pricing competition has pulled down market prices for many of the company's products. If this trend holds, it could further harm the company's financials.

Outlook:

Encouraging Outlook (Source: Q2FY21 Earnings Release, August 03, 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LUMN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

LUMN's stock price has declined 6.97% in the past six months and is currently trading close to mid-band of its 52-week range of USD 8.59 to USD 16.60. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 48.28. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 15.21.

Considering the slight correction in the stock price in the past six months, key collaborations, strong profitability margins, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 12.22, up 1.24% as of November 02, 2021, 2:35 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.   

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