On Wednesday, Citi analyst Michael Rollins (NYSE:ROL) upgraded Lumen Technologies stock, traded on the New York Stock Exchange (NYSE:LUMN), from Neutral to Buy, despite lowering the price target to $6.50 from the previous $8.00. According to InvestingPro data, analyst targets for the stock currently range from $2 to $8, with the company commanding a market capitalization of $4.52 billion. Rollins highlights a potential 46% Equity Total Return (ETR) and identifies four key catalysts that could positively impact Lumen’s performance over the next year.
Rollins points out the opportunity for Lumen to increase its Productivity and Collaboration Factory (PCF) sales. Additionally, the company is exploring the potential monetization of its fiber assets or mass market segment. The transformation of the company’s operations to enhance integration and reduce costs is cited as another positive step, along with the potential improvement of sales in the core business segment, which may lead to revenue growth within that segment. InvestingPro data shows the company generated $13.11 billion in revenue over the last twelve months, though facing a challenging environment with a 10% revenue decline.
The Citi analyst believes that these actions will provide Lumen with the financial flexibility it needs to turn around its business segment. He forecasts that Lumen is positioned to start growing its consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) significantly on an annual basis starting in 2026. Current EBITDA stands at $3.41 billion, according to InvestingPro data, which also reveals a strong current ratio of 1.21, indicating sufficient liquidity to meet short-term obligations. Rollins also sees an opportunity for Lumen to improve its market share in the business category over time.
The upgrade comes in the wake of a recent pull-back in Lumen’s shares, which Rollins views as creating a favorable risk-reward situation. Despite a 9% decline over the past week and 27% drop in the past six months, the stock has shown remarkable resilience with a 200% return over the past year. He suggests that the announcement of additional PCF sales could serve as a potentially positive catalyst for the company’s stock. Rollins’ commentary underscores his belief in the company’s ability to deliver forward progress on these catalysts.
In other recent news, Lumen Technologies reported fourth-quarter earnings and revenue that exceeded analyst expectations. The company posted adjusted earnings per share of $0.09, surpassing the anticipated -$0.06, with revenue reaching $3.33 billion against a forecast of $3.19 billion. This marks a significant improvement from the previous year’s net loss, which included a $1.9 billion non-cash goodwill impairment charge. Despite a 5% year-over-year decline in total revenue, primarily due to the divestiture of its EMEA business, revenue from North America Enterprise Channels remained stable. Lumen provided guidance for 2025, expecting adjusted EBITDA between $3.2 billion and $3.4 billion and free cash flow of $700 million to $900 million. Citi analyst Michael Rollins maintained a Neutral rating on Lumen, citing the company’s potential for strategic balance sheet improvements and monetization of assets. However, Rollins expressed caution due to the high-risk nature of the investment and the need for consistent revenue growth across segments. He noted the complexity in evaluating Lumen’s business segment results due to non-cash deferred revenue amortization.
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