LUMN an AI Rocket or next Super Micro $SMCI ?
My last post on $Lumen Technologies(LUMN)$ was just 4 days ago, published on Sun, 04 Aug 2024. Click here ! to read about it and repost ok.
When LUMN closed on Fri, 02 Aug 2024 it was $3.07 per share.
Since then, its stock price has exploded due to forward pricing of the company’s recent business potentials, cover in my Sunday pick post.
On Wed, 07 Aug 2024 when US market “opened high and ended low”, LUMN was able to:
Power higher to close at $6.63 per share; a +32.6% higher than Tuesday $5.00 closing.
Shaked off its weak Q2 2024 earnings results.
Revealed more billion-dollar business prospects are in discussions.
The sudden surged in its stock price has led Baron’s to question whether (a) LUMN is an AI rocket or (b) the next $SUPER MICRO COMPUTER INC(SMCI)$ ? (see below)
Preface.
LUMN recent rally is mainly because of a deal with $Microsoft(MSFT)$ using LUMN's network for data centers.
Short sellers who have bet against the stock had to buy it back quickly (to cover the shortfall), pushing the price up even more.
Most of the LUMN buyers are ordinary people, not big investors.
This looks similar to what happened with SMCI, but there's a big difference.
SMCI is profitable, while Lumen is still losing money.
Q2 2024 Earnings.
On Tue, 06 Aug 2024, LUMN announced its quarterly earnings.
Revenue: came in at $3.27 billion, that is a -10.73% YoY loss.
Earnings per share (EPS) adjusted: -$0.05 per share, that is a +99.44% YoY gain.
Net income: was -$49 million, a +99.44% YoY gain.
Net margin: came in at -1.5%, that’s a +99.37% YoY improvement.
2024 Full Year Outlook.
Lumen shares rallied in after-hours trade after the firm sharply increased its free cash flow forecast for the full year of 2024.
As indicated in bold below, FCF is up to $1.2 billion. (see below)
The Pivot.
Lumen is trying to change its business to focus on data centers.
It has a deal with Microsoft worth about $5 billion over the next few years.
According to Moffett Nathanson, Analyst Nick Del Deo :
The MSFT-LUMN deal will only make a small amount of money for Lumen at first.
Lumen also has a lot of debt and is losing cash.
To do well, Lumen needs more deals like the Microsoft contract.
It needs to cut costs too.
Until then, the stock price could be too high.
People who bought the stock early might want to sell now to make a profit.
Technical Analysis.
Above is the 1-day “old” technical analysis summary.
Overall consensus is a “Buy”.
Technical analysis consensus is a “Sell”. Give past 3 of 4 quarters were negative, this is expected.
Moving averages consensus is a “Strong Buy”, given its recent rally.
My viewpoints: (mine only)
In the past 5 days, LUMN has risen by +111.79% to $5.57 per share.
It peaked at $8.04, on 06 Aug 2024 and experienced pull backed for the past two days.
During the post earnings conference, LUMN CEO Kathleen Johnson has shared:
First, movement enterprise operational turnaround is progressing well with continued sales momentum across our growth portfolio and further improvement in customer satisfaction.
Lumen has been anointed as the trusted network for AI by some of the most important technology companies on earth with over $5 billion in major partnerships in to date and visibility to nearly $7 billion more in opportunities, we see the market for Lumen's private connectivity fabric as providing a major positive momentum shift for this company.
Given our success in forging these partnerships, we're seeing a significant improvement in our overall liquidity profile further securing our ability to transform the company and pivot to growth.
Granted that most post earning conferences try to be positive. Now it's time for investor to decide: Do you keep LUMN stock (with conviction) or sell it to make a profit ?
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Do you think LUMN will be able to secure more billion-dollar contracts within next 4 months ?
Do you think past 2 days of pullback will be over soon or will it persists ?
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Getting ready to drop again. The average price is $3.15, but the gap that needs to be filled is $2.50
A lot of accumulating going on. Strong bounce to $6 up next. Squeeezeeee
LUMN tried to sustain a dead-mouse bounce to regain $5.00 level
Strongly believe that we will touch $9 EoW
Looks like rotation back to mag7 chip stocks
Is it really.?
The mkt did it becos it's the week of inflation report again....
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