LUMN Surges 26% in the Past Year: Can It Sustain the Momentum in 2026?

Core Insights - Lumen Technologies, Inc. (LUMN) shares have increased by 25.9% over the past year, outperforming the S&P 500 and the Diversified Communications Services sector, which grew by 18% and 13.7% respectively [1][3] - The stock's growth is attributed to the company's strategic pivot towards AI, balance sheet improvements, and enhanced operational execution [1] Financial Performance - LUMN closed at $7.63, significantly below its 52-week high of $11.95, raising questions about potential upside [4] - The company has secured $10 billion in Private Connectivity Fabric (PCF) deals, indicating strong demand driven by AI [5][8] - Lumen's NaaS platform has surpassed 1,500 customers, with a 32% sequential increase in active customers and a 36% increase in services sold [10] Strategic Initiatives - Lumen is focusing on cost-cutting measures, aiming for $1 billion in savings by the end of 2027 through infrastructure simplification [12] - The company plans to sell its Mass Markets' fiber-to-the-home business to AT&T for $5.75 billion, which will help in deleveraging and improving its balance sheet [13][14] - Management anticipates that the existing PCF business will generate $400-$500 million in recurring revenues by the end of 2028 [9] Market Position and Valuation - LUMN is trading at a price-to-sales ratio of 0.66, significantly lower than the industry average of 1.45, indicating a compelling valuation [15][17] - Analysts have revised earnings estimates upwards for 2025, reflecting positive sentiment towards the company's future prospects [18] Growth Outlook - The increasing demand for AI-driven connectivity solutions positions Lumen favorably in the market, with partnerships established with major tech companies like Microsoft and Amazon [6][20] - The company's new business model, including the PxQ model and Project Berkeley, aims to enhance its service offerings and market reach [11]