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Will Lumen Technologies' Asset Sale Spark a Recovery in Its Stock?
Will Lumen Technologies' Asset Sale Spark a Recovery in Its Stock?

Globe and Mail

time28-05-2025

  • Business
  • Globe and Mail

Will Lumen Technologies' Asset Sale Spark a Recovery in Its Stock?

Telecom specialist Lumen Technologies (NYSE: LUMN) just announced the sale of its mass-market fiber business to AT&T for $5.75 billion. That move continues the transformation which began last summer when it partnered with Microsoft to leverage its existing network to strengthen connectivity among Microsoft's data centers. It has also agreed to provide similar services to Amazon and Meta Platforms. The sale of the mass markets fiber business seems to confirm that Lumen is pivoting toward business and away from the consumer market. The question for investors is whether that deal will boost Lumen's stock over the long term. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » The AT&T deal and its implications According to CEO Kate Johnson, the company will receive net proceeds of $4.8 billion. Lumen can use those funds to reduce its debt or support its growing need to increase its capital expenditures as the company tries to reinvent itself from what had been a declining wireline telco business. Still, one has to assume Lumen will focus on debt reduction at some level. As of the first quarter of 2025, it holds $17.3 billion in long-term debt. The company's book value is only $289 million, so that liability has put tremendous strain on the company's balance sheet. Moreover, the company has to build what it calls a "backbone" for artificial intelligence (AI) to serve its enterprise customers. To that end, Lumen plans to spend $4.1 billion to $4.3 billion in capex this year, presumably to help build that AI backbone. That is up 30% from the $3.2 billion in spending in 2024 but should enable the company to meet the needs of its new customers. Does the deal boost the case for Lumen stock? Nonetheless, investors may be right to question how much the deal helps Lumen as an investment. So far, the pivot toward enterprise has not boosted the company's financials. In the first quarter of 2025, revenue dropped 3% year over year to $3.2 billion. Although that is an improvement from the 10% drop in revenue in all of 2024, it still represents a decline. Despite a net loss of $201 million, Lumen generated $354 million in free cash flow in Q1. Unfortunately, Lumen expects $700 million to $900 million in free cash flow in 2025, down from $1.4 billion in 2024. However, free cash flow will fall because of the increase in capex spending, not poor financial performance. Investors do not know quite what to make of Lumen's transformation. The stock is up 200% over the past year but down 64% from its peak in November. This likely indicates that investors are wary. Measuring the valuation is also tricky. The lack of profitability leaves it without a P/E ratio. As for its price-to-sales (P/S) ratio, it is less than 0.3. That is up from 2024 lows but below the five-year average of 0.4, making it unclear whether Lumen's valuation will help draw investors back to its stock. Should you buy Lumen Technologies stock? Given the current state of the company, investors should probably limit stock purchases to speculative positions until its deals begin to drive positive revenue growth. Prospects for a turnaround have improved thanks to the aforementioned AI partnerships, and the cash infusion from the sale of the consumer fiber business greatly increases the odds of a turnaround. Unfortunately, these deals have not translated into an improved financial performance. Lumen's revenue continues to fall, and forecasts indicate that trend will continue through 2025 and 2026. Ultimately, until revenue growth turns consistently positive, Lumen stock will probably struggle to move higher. Should you invest $1,000 in Lumen Technologies right now? Before you buy stock in Lumen Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lumen Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,389!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $830,492!* Now, it's worth noting Stock Advisor 's total average return is982% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

AT&T to Acquire Lumen's Consumer Fiber for $5.75 Billion
AT&T to Acquire Lumen's Consumer Fiber for $5.75 Billion

Yahoo

time24-05-2025

  • Business
  • Yahoo

AT&T to Acquire Lumen's Consumer Fiber for $5.75 Billion

On Wednesday, AT&T Inc. (NYSE:T) announced an agreement to acquire substantially all of Lumen Technologies' (NYSE:LUMN) consumer fiber business for $5.75 billion in cash, subject to purchase price adjustments. This aims to expand AT&T's national fiber footprint, which is expected to close in H1 2026, pending regulatory approval by the Department of Justice and other customary closing conditions. Close-up of a technician's hands adjusting a communication router. The acquisition will add ~1 million fiber customers to AT&T Inc.'s (NYSE:T) base and extend its fiber-network operations in major metropolitan areas across 11 US states. This expansion aligns with AT&T's goal to reach ~60 million total fiber locations by year-end 2030, which would almost double its current fiber availability. For Lumen Technologies (NYSE:LUMN), the sale of its consumer fiber assets allows the company to sharpen its focus on its enterprise fiber business. Chris Stansbury, CFO of Lumen, stated that the cash proceeds from the sale will help Lumen reduce its debt by $4.8 billion and enhance cash flow by cutting interest expenses by over $300 million annually. Lumen will retain its enterprise and wholesale fiber customers, its national fiber backbone network infrastructure, and its existing copper network that primarily serves consumer customers. While we acknowledge the potential of T to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than T and that has 100x upside potential, check out our report about the cheapest AI stock. READ NEXT: and . Disclosure: None. This article is originally published at Insider Monkey.

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