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Lumen Technologies: Is It a Buying Opportunity or Time to Cut Losses?

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Written by Timothy Sykes Reviewed by Jack Kellog Fact-checked by Ellis Hobb
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Recent news regarding challenges in debt reduction and strategic shifts at Lumen Technologies Inc. has drawn significant investor scrutiny, likely contributing to market volatility. On Wednesday, Lumen Technologies Inc.’s stocks have been trading down by -3.79 percent.

  • A US government panel is scrutinizing cybersecurity breaches by Chinese hackers on telecom networks, involving Lumen, raising national security concerns.
  • Lumen faces lowered price targets by TD Cowen, from $7 to $6, citing large downside risks and heavy transformational expenses.
  • The company’s third-quarter financials revealed a net loss more than $146M, reflecting increasing challenges as shares fell 6% after hours.
  • Third-quarter earnings discussion echoed concerns over the full-year EBITDA forecast remaining at the lower bounds of expectations.
  • Despite a reported rise in Quantum Fiber subscriptions, Lumen’s year-over-year adjusted EBITDA saw a decline, according to recently published results.

Candlestick Chart

Live Update at 17:03:36 EST: On Wednesday, November 13, 2024 Lumen Technologies Inc. stock [NYSE: LUMN] is trending down by -3.79%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Lumen Technologies’ Earnings Snapshot

What’s piercing through Lumen Technologies’ financial veil is far from just a ray of light; it’s a mixture of shadows and glimmers of hope. Third-quarter performance highlights a mixed bag — while the company achieved certain strides such as recording net subscription gains in its Quantum Fiber business, the net loss widened substantially from last year’s figures. Imagine navigating a ship in a storm, spotting land even as waves crash over the bow; Lumen seems to be in such a tenterhook position.

A stark fact: net loss plunged deeper, to $148M this quarter from $78M last year, despite efforts to attend to core business sectors like Private Connectivity Fabric (PCF). Briefly, even amidst innovation, Lumen struggles with profit margins, showing negative numbers across essential metrics, such as the EBIT margin and overall profit returns. Despite an overall revenue of around $14.56B, the profitability lines are blurred, hinting at operational upheavals.

The stock market reflected these developments. From those numbers — a 6% share drop in after-hours trading — it’s clear that investors are waving caution flags. The earnings report carefully lays Lumen’s plans to steer through this financial turbulence, but questions linger on long-term sustainability.

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Deconstructing the News Impact on Market Changes

Cybersecurity Breach Concerns:

In the labyrinthine networks that stitch together telecommunications, breaches are akin to ruptures in a dam; they promise a flood of troubles. Currently, Lumen finds itself embroiled in such turbulence, as U.S. government entities probe cyber incursions allegedly orchestrated by Chinese hackers. Such breaches twice involve Lumen, alongside juggernauts Verizon and AT&T. These disquieting invasions not only imperil data security but also cast a shadow on corporate ethics and reputation.

Market response to these intrusions shows short-term wounds in stock prices — a tentative mass exodus from befuddled investors unsure about future fallout or defense measures. The resonance from the market is palpable, echoing concerns over how Lumen will fortify its cyberinfrastructure without hemorrhaging financial resources or unsettling loyal clients.

Financial Adjustments and Market Sentiments:

Additional challenges throw focus on strategic cost containment. Earlier this week, analysts cut Lumen’s target stock price by $1 to $6, referencing unsatisfactory third-quarter results and looming pressures from heavy spending aimed at operational revitalization. Here, phrases akin to “transformational spending” emerge frequently, as the company aligns itself to endure an arduous journey to recovery. Dissonance between revenue aspirations and actual figures has created ripples extending to stakeholders’ confidence, challenging Lumen’s strides toward stabilization and growth.

What might stir interest amongst prospective investors are the favorable forecasts from new ventures within Quantum Fiber and Private Connectivity Fabric. The symphony of potential and peril plays simultaneously, with buzzwords like Fiber growth underscoring market optimism. Nonetheless, these are interspersed within the statements cautioning high bets on recovery while maintaining a vigilant eye on execution risks and broader market developments.

Summary

Lumen Technologies is at a crossroads: balancing between glimpsed opportunities like Quantum Fiber expansion and formidable challenges, notably financial erosion and persistent market skepticism due to cybersecurity events. As recent insights communicate subtly, it appears that leveraging operational efficiencies and solidifying core business areas are essential strategic paths forward.

Investors eyeing Lumen may choose to tread carefully, weighing the company’s capacity for sustained innovation and risk management during this tumultuous financial theater. As Lumen confronts its array of issues leveraging initiative, its narrative remains cautiously hopeful yet exposed to volatility, navigating through an opaque and dynamic market landscape.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”