Lumen Technologies (LUMN.US) fell over 10%! Downgraded by an institution: There is a risk of a 40% drop

Market VisionWednesday, Sep 4, 2024 3:10 am ET

1min read

Zhitong Finance learned that Lumen Technologies (LUMN.US) fell more than 10% on Tuesday after research firm Hedgeye issued a bearish view on the stock, saying it has a 40% downside risk. Andrew Freedman, an analyst at Hedgeye, wrote in a report on Tuesday: "Lumen's financial condition remains unstable, with high leverage (net long-term debt/EBITDA at 4.3 times), declining EBITDA margin, and limited free cash flow generation (i.e. unable to earn its cost of capital). The company's recent debt restructuring has pushed out near-term maturities to 2029."

Freedman added that the new $5 billion "private connection structure" deal helps fill a $1 billion liquidity gap through 2027, though it does not solve Lumen's "fundamental problems."

A week ago, Kerrisdale Capital released a bearish report on Lumen, leading to a 15% drop in the stock on August 27.

Lumen said in a statement on Tuesday: "Lumen is the trusted network for AI, and recent announcements reflect not only our confidence but also that of others competing for bandwidth. AI needs data centers - data centers need connectivity - connectivity needs fiber. As AI develops, so does the demand for Lumen's network."

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