Should You Add LUMN Stock to Your Portfolio Pre-Q1 Earnings?

Core Viewpoint - Lumen Technologies, Inc. is expected to report a loss of 25 cents per share for Q1 2025, a significant increase from a loss of 4 cents in the same quarter last year, with total revenues projected at $3.1 billion, reflecting a 5.8% year-over-year decline [1] Financial Performance - Lumen has beaten the Zacks Consensus Estimate for earnings in the last two quarters, with an average earnings surprise of 42.4% [2] - The company has an Earnings ESP of 0.00% and a Zacks Rank of 2 (Buy) [5] Revenue Trends - Lumen's total revenues declined by 5.3% year-over-year in the last reported quarter, primarily due to divestitures and the sale of the CDN business [6] - The company is experiencing ongoing weakness in its legacy business, which is expected to continue affecting revenue growth in the near term [6] Growth Initiatives - Lumen is shifting focus towards newer growth products such as fiber and cloud-based offerings, driven by increasing demand from hyperscalers and enterprise markets [7] - The company secured $8.5 billion in Private Connectivity Fabric (PCF) deals in 2024 and announced a partnership with Google Cloud to address enterprise customer demands related to AI workloads [7] Service Adoption - There has been a notable increase in the uptake of Lumen's services, particularly in the large enterprise and mid-market segments, with a nearly 50% increase in 100 and 400-gig wave sales in 2024 [8] - Lumen added 43,000 Quantum fiber subscribers in the last reported quarter, bringing the total to one million [9] Market Position - Lumen's stock has declined by 49.3% over the past six months, underperforming its industry and the S&P 500 [12] - The company is trading at a trailing 12-month price-to-sales ratio of 0.25, significantly below the industry average of 1.40 [18] Investment Considerations - Despite challenges such as heavy debt and competition in the AI space, Lumen's alignment with AI and cloud computing growth presents promising opportunities [20] - The company's focus on cost discipline and expansion into Network-as-a-Service (NaaS) markets are seen as positive factors for future growth [20][21]