Several catalysts may send lagging Lumen Technologies shares higher in the months ahead, according to Citi. The firm upgraded the telecommunications stock to buy from neutral but decreased its price target to $6.50 from $8. The updated target still reflects 46.4% upside from Tuesday’s close. Earlier in February, the company posted weaker-than-expected full-year earnings guidance, raising concern over the stock’s prospects moving forward. Shares this past month have dropped 25%. “We believe the recent weakness in the stock offers a buying opportunity given four potentially positive catalysts that can emerge over the next 12-months and support a better value for Lumen’s stock,” analyst Michael Rollins wrote. “We also believe that Lumen’s share price performance can reduce the influence from AI data points and sentiment given the anticipated durability of its announced long-term IRU deals with the hyperscalers, as well as the separate opportunities to improve value from possible asset monetization, business transformation, and potential improvement in core business sales,” Rollins added. LUMN 1M mountain LUMN, 1-month Noting that Lumen has already secured $8.5 billion in private connectivity fabric deals, Rollins said he expects the company to announce another $3.5 billion of PCF sales over the next six months. Those additional sales could push up shares, he said. Additionally, Rollins believes Lumen is possibly pursuing a sale or monetization for its fiber assets, which he thinks could help reduce net debt and enhance financial flexibility. “While we would rather see Lumen divest all of the mass markets business, we believe the opportunity to sell only the fiber assets probably expands its universe of possible buyers given the comments from both AT & T and T-Mobile management at their respective Analyst meetings,” Rollins said, adding that he believes those two names as well as Verizon would have interest in Lumen’s fiber assets. In the near term particularly, shares could also be supported by the company’s cost-cutting efforts and plans to integrate past business segment acquisitions, Rollins added, pointing out that Lumen is “on track” to reduce annual costs by around $1 billion. He also cited the opportunity to improve revenue in its Grow business segment this year as another catalyst for growth. Unlike Rollins’ bullish stance, most analysts are on the sidelines on Lumen. In fact, only two out of 14 analysts covering it have a buy rating, while 10 have a hold rating, per LSEG data. Its average target of around $5 still calls for sizable share growth ahead, however, as it implies 18.2% upside. Shares surged in premarket trading Wednesday, jumping more than 9% following Rollins’ call.
