Lumen Slips 14% in a Month: How Should You Play the Stock?

Price Performance - LUMN stock closed at $5 36, trading 48 1% below its 52-week high of $10 33 [2] - The stock has experienced a sharp rally of 237% over the past year but is now showing signs of volatility [2] - LUMN shares have slipped 13 7% in the past month compared to the S&P 500's decline of 4 1% and the sub-industry's decline of 8 5% [17] Financial Performance and Guidance - LUMN expects 2025 EBITDA to be below 2024 levels due to transformation costs and higher startup costs for PCF sales [3] - The company anticipates a significant EBITDA rebound in 2026 and growth thereafter [3] - LUMN raised its 2024 free cash flow guidance to $1 2-$1 4 billion from the previous range of $1-$1 2 billion [8] - For 2024, LUMN expects adjusted EBITDA in the range of $3 9-$4 billion and capital expenditures between $3 1 billion and $3 3 billion [19] Debt and Cost Management - LUMN has a significant debt load with $18 142 billion in long-term debt as of Sept 30, 2024, compared to $18 411 billion as of June 30, 2024 [4] - The company is targeting $1 billion in cost savings by the end of 2027 through infrastructure simplification and product portfolio reduction [12] Business Developments - LUMN has secured $3 billion in incremental PCF deals, bringing the total to $8 billion in new PCF sales since June 2024 [7] - The company has inked deals with tech giants like Microsoft, Amazon, Google Cloud, and Meta Platforms to provide network capabilities for AI innovation [8] - LUMN added 43,000 Quantum Fiber subscribers, reaching a total of 1 million in the reported quarter [11] - The company added 131,000 Fiber broadband-enabled locations in Q3 2024, with a total of 4 million enabled locations as of Sept 30, 2024 [11] Market Sentiment and Valuation - LUMN is trading below its 50-day and 100-day moving averages, indicating a bearish sentiment among analysts [6][15] - The stock is trading at a trailing 12-month price-to-sales ratio of 0 4, significantly below the industry average of 9 71 [13] Challenges and Risks - LUMN's total revenues declined 11 5% year over year to $3,211 million in Q3 2024 due to divestitures and the sale of the CDN business [18] - The company continues to face weakness in its legacy business, which is expected to strain top-line expansion in the near term [18] - Incremental costs from expanding new business, particularly PCF sales, are expected to pressure margins [19]