Lumen Technologies (LUMN) stock skyrocketed over 37% in Wednesday’s pre-market trading after the company issued robust full-year guidance. The company reported mixed results for the second quarter of 2024. The share spike follows a healthy trading day for Lumen on Tuesday, when its stock surged over 93% to reach a fresh 52-week high of $5.30 in reaction to news of solid partnerships.
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Lumen Technologies is a telecommunications services company that offers networking, edge cloud, collaboration, and cybersecurity solutions.
Lumen’s Mixed Q2 Results
In Q2, Lumen reported an adjusted loss of $0.13 per share, which was higher than the consensus loss of $0.06 per share and worse than the prior-year quarter’s profit of $0.10 per share. Total revenue of $3.27 billion declined 10.7% year-over-year but marginally beat the consensus of $3.25 billion. On a sequential basis, revenues dropped only 1%.
Lumen is highly optimistic about the burgeoning demand for AI (artificial intelligence), which is dependent on efficient and secure connectivity between data centers. Lumen’s fiber network is gaining momentum as it offers high bandwidth connectivity for AI infrastructure.
Importantly, the company is witnessing solid growth in North American large and mid-market enterprise business in terms of new logo sales and total contract value, both of which are expected to boost its revenues.
Lumen Upgrades Full-Year Metrics
Based on the foreseeable demand for its offerings, Lumen lifted the guidance for certain metrics for Fiscal 2024. Importantly, the company expects its free cash flow to be between $1.0 billion and $1.2 billion, significantly higher than its prior forecasted range of $100 million to $300 million.
For reference, Lumen generated free cash flow of only $147 million in the six months ended June 30, 2024. The company’s full-year guidance indicates robust cash flow in the second half of the year, backed by solid top-line growth expectations.
Lumen Secures $5B in New AI Deals
On August 5, Lumen announced that it has secured $5 billion worth of new deals from large enterprises that rely on its fast and secure network infrastructure to power their AI needs. Moreover, the company stated that it is in active talks to secure an additional $7 billion in potential sales deals, thanks to growing demand for its offerings.
The AI deal includes Lumen’s recently announced partnership with tech giant Microsoft (MSFT). Lumen will leverage Microsoft Cloud for digital transformation, while MSFT will utilize Lumen’s network capacity to meet its expanding data center needs.
Hedge Funds Load Up Lumen Stock
TipRanks’ Hedge Funds Trading Activity tool shows that hedge funds are loading up Lumen stock. Currently, LUMN has a Very Positive Hedge Fund Confidence Signal as hedge funds increased their LUMN holdings by 1.4 million shares in the last quarter.
Is Lumen a Good Investment?
Analysts are slowly realizing the massive future potential in LUMN shares, with two analysts recently upgrading the stock from a Sell to a Hold rating. The updated cash flow guidance and new business wins could further compel analysts to revisit their recommendations.
Currently, LUMN stock has a Moderate Sell consensus rating based on two Holds and two Sell ratings. The average Lumen Technologies price target of $1.56 implies 68.8% downside potential from current levels, as shares have already zoomed over 173% year-to-date.
