Lumen Technologies up 44% in US pre-market as shares extend AI rally 📈

Lumen Technologies extends a rally, up more than 500% since the beginning of July and another 44% in today pre-market, as Wall Street bets on AI catalyst on company business. The company’s CEO, Kate Johnson, commented that the company ‘is confident in future growth and business transformation, looking to enable AI economy’. During last few sessions we can see that company 'repricing process' accelerates with shares rising 90% in last 5 sessions and 371% since July 7. 

• Now Wall Street expects that rising demand for AI, requiring connectivity between data centres and Lumen’s network as well as forward-thinking digital services, is positioning the company as a one of AI winners. 
• The announced partnership with cloud giant, Microsoft Azure (Lumen will be its fiber  infrastructure provider) was seen as a ‘proof’ of that. Companies have to rise CAPEX, boosting demand for some hardware companies producers, and Lumen may benefit from that in the long term.
• According to the Lumen statement, 'companies across industry sectors are seeking to secure fiber capacity quickly, as this resource becomes increasingly valuable and potentially limited, due to booming AI needs.'
• Lumen expects that it will at least double its intercity network miles over the next 5 years, providing access to a significant amount of installed dark fiber. The company secured an agreement with Corning to be its preferred partner for next-generation fiber-dense cable, which will help accommodate the increased data processing that AI requires.
• The Company secured $5 billion in completely new deals, and is now in talks which may end with another $7 billion. As for now, Lumen Technologies market cap is $5.5 billion; Citigroup upgraded the stock rating to neutral, as markets expect rising fiber networks deals. Analysts cited profitability, spin-offs and debt unload as main stock drivers.

However, Q2 2024 for the company was overall weak, so current valuation is based on projections of future revenue growth and profitability. The company historically had long periods of negative net margins, hitting all-time lows zone, this summer. Today, Lumen’s shares gain 44% to $7.25 per share, one step closer to SMA200 on the weekly interval. Some investors are seeing AI as the unprecedented company business catalyst.

Source: xStation5

Source: xStation5

Lumen Financial dashboards

The company business was far from expansion during last years and quarters, with negative net income and falling revenues. However, fiber market deals may transform the company  business over the long term. A deal with Microsoft signal that the AI market, in which Lumen operates, is quite narrow and partnership may bring higher sales attention to the company.

Source: XTB Research, Bloomberg Finance L.P.

Source: XTB Research, Bloomberg Finance L.P.