Lumen Skyrockets 176% in a Year: Should Investors Still Buy the Stock?

Core Viewpoint - Lumen Technologies, Inc. (LUMN) has experienced a significant stock surge of 175.8% over the past year, driven by increasing demand for AI-fueled connectivity solutions, outperforming both the S&P 500 and its industry peers [1][12]. Group 1: Growth Factors - The demand for Lumen's Private Connectivity Fabric (PCF) solutions is rising due to rapid AI proliferation, with the company securing $8.5 billion in PCF deals for 2024 [2]. - Major companies are urgently seeking fiber capacity, leading to valuable partnerships with tech giants like Microsoft, Amazon, Google Cloud, and Meta Platforms [3]. - Lumen's sales in IP and Wave services have increased by 13% each in North America's enterprise channels, highlighting strong demand in large enterprise and mid-market segments [3]. Group 2: Network Expansion - In 2024, Lumen expanded its high-speed IP service to include 400 gig ports in 14 additional markets, with 400-gig Waves available in over 70 markets [4]. - The company reported nearly a 50% increase in sales of 100 and 400-gig Waves across large enterprise and mid-markets in 2024 [4]. - Lumen aims to grow its total inter-city fiber miles from 12 million in 2022 to 47 million by 2028, indicating a strong focus on network expansion [4]. Group 3: Operational Efficiency - Lumen is working on increasing overall network utilization from 57% in 2022 to 70% by 2028, driven by demand from hyperscalers [5]. - The company is targeting $1 billion in cost savings by the end of 2027 through infrastructure simplification and product portfolio integration, aiming to reduce product codes from thousands to nearly 300 [9]. Group 4: Valuation and Investment Potential - LUMN is currently trading at a trailing 12-month price-to-sales ratio of 0.41, significantly below the industry average of 4.36, indicating a compelling valuation [10]. - The combination of strong stock performance, extensive cost cuts, and discounted valuation positions LUMN as an attractive investment opportunity [12].