If you’ve been on the fence about what to do with Lumen Technologies (LUMN), the latest news could tip the scales. The company just announced a partnership with Palantir Technologies to integrate Palantir’s Foundry and AI Platform into Lumen’s business modernization drive. This move is focused on using advanced data and automation to overhaul how Lumen operates, targeting everything from complex legacy workflows to customer service. As soon as the collaboration went public, the stock responded significantly, with shares surging 9.4% on the day. This was a clear indication that investors see potential in the deal to transform Lumen’s setup for the digital era.
The Palantir announcement comes at a time when Lumen has been juggling the challenges and opportunities that come with reinventing its business. Over the past year, the shares have lost 18%, reflecting the tough restructuring environment. However, the recent month’s 26% jump shows that momentum is starting to shift. Just days before this partnership, Lumen also revealed a $425 million debt refinancing aimed at lowering interest expenses and improving its balance sheet. These recent moves suggest that Lumen is not standing still; there is a visible push toward transformation and efficiency that investors are noticing.
With the stock now rebounding and Lumen rolling out strategic changes, is the market undervaluing the company’s turnaround story? Or is all that growth potential already reflected in the share price?
Most Popular Narrative: 6.2% Undervalued
The most widely followed narrative sees Lumen Technologies as undervalued by just over 6 percent, with recent strategic moves believed to set the stage for a turnaround.
"Strategic refinancing, deleveraging, and the pending sale of the consumer fiber-to-the-home business to AT&T will materially strengthen Lumen's balance sheet, reduce interest expense by $300 to $400 million annually, and free up capital for enterprise-focused growth initiatives. These actions are expected to directly impact future net earnings and free cash flow."
The valuation math behind this narrative is fascinating. What's really driving the projection? Is it aggressive margin expansion, bold revenue expectations, or something unusual in how future earnings are valued? One key factor underpins the entire price target. Want to know which? Keep reading to uncover how this optimistic outlook is calculated.
Result: Fair Value of $5.06 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, persistent declines in legacy business segments and dependence on a few large customers could still threaten Lumen’s growth outlook and financial stability.
