![]() ![]() On July 9, 2023, the Wall Street Journal published an article reporting that more than 2,000 abandoned lead cables, previously used by various telecommunication companies, were degrading and leaching into soil and groundwater, posing a significant public health risk. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.The investigation concerns whether Lumen has violated federal securities laws. On the date of publication, Thomas Niel held a long position in LUMN. Yet, if you’re an investor with a long-term horizon, and are on the prowl for value, consider LUMN stock a buy. It is also not an opportunity that will quickly pay off. It is definitely not the most exciting stock out there. Compared to its market capitalization of $11.68 billion, buying back another $1 billion worth of shares would help boost returns. ![]() It likely has the ability to do this again. The company bought back $1 billion worth of shares last year. But remember that besides the fact its high dividend will “pay out while you wait,” management has another way to return capital to shareholders and help move the needle in the process. With the prospect that it continues to languish at or near today’s prices, I can see why you may not find Lumen stock all too appealing. For Long-Term Value, Consider LUMN Stock a Buy This is something my InvestorPlace colleague Stavros Georgiadis pointed out in his cautious take on the stock last month. Also, rising interest rates may dampen the appeal of its high yield. In addition, there is the stock’s high yield, although it is not guaranteed this will continue to provide a floor for shares.Īlthough its 2022 outlook signals it has the cash necessary to maintain it, concerns about a possible dividend cut could always arise. Trading for 8.5x estimated earnings, it already trades at a highly discounted valuation. On the flipside, while an upwards surge may take time, downside risk appears minimal. Its faster-growing lines of business have a lot of catching up to do before they make up for the negative growth/zero growth of the company’s remaining legacy business lines. However, until this transformation completes, there is a good chance shares don’t move too far away from current prices. ![]() This is in thanks to both increased earnings, as well as from multiple expansions. In time, as it goes from being mostly a provider of old-fashioned phone service to mostly a provider of more modern services, like edge computing and quantum fiber, LUMN stock could soar in price. Nevertheless, keep in mind that the “payoff” for shares may take time to arrive. Moving away from its roots as a legacy phone company in decline, in theory this transformation, combined with de-leveraging, should result in big gains for LUMN stock.Įspecially as the company also continues to use its cash flow to aggressively buy back stock. The asset sales also provide it with capital to invest into its next-generation lines of business. This cash will help it pare down the long-term debt of $27.2 billion on its balance sheet. Along with a pending $2.7 billion deal for its Latin American segment, the heavily leveraged company is about to receive a large cash infusion. This deal is set to close later this year. Funds managed by private equity firm Apollo Global Management (NYSE: APO) are buying them for $7.5 billion. It is currently selling its incumbent local exchange carrier (ILEC) operations. However, it is in the process of streamlining operations. At present, the company is a hodgepodge of legacy and more modern telecom businesses, serving both residential and commercial customers. Formerly known as CenturyLink, Lumen is the end result of several decades of telecom mergers. ![]()
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