Shares of Lumen Technologies(LUMN.US) continue to soar after the company announced it had secured $5 billion in new business to ensure optical fiber service capacity, including data centers that power artificial intelligence(AI) applications.
Lumen also disclosed that it is about to secure another $7 billion in sales to meet growing demand.
The company announced multi-year deals with Microsoft(MSFT.US) and Corning(GLW.US) in recent weeks.
Lumen will retain 10% of Corning's global optical fiber capacity over the next two years to connect data centers that support AI. Lumen's private connectivity platform will also connect Microsoft's data centers.
The positive developments have prompted Goldman Sachs to upgrade Lumen from “Sell” to “Neutral.”
“Our prior view on Lumen was that its traditional revenue streams would decline significantly, and that the corresponding EBITDA growth would be negatively impacted — we continue to see these traditional businesses facing significant risk of decline,” said James Schneider, analyst at Goldman Sachs.
“However, we believe Lumen’s latest business announcements provide the company with clear, long-term cash flows that will increase the stock’s value,” he added. “Therefore, we believe the stock can maintain a higher multiple than we previously anticipated.”
Lumen CEO Kate Johnson said on a Tuesday earnings call: “Lumen has been selected by some of the world’s most important technology companies as a trusted AI network company.” “To date, Lumen has signed over $5 billion in partnership agreements and seen over $7 billion in opportunities, and we believe Lumen’s private connectivity platform will deliver a significant positive transformation for the company.”
Seeking Alpha analyst Chris Lau rates Lumen as a “Strong Buy.” He noted: “The company needs to secure an additional $700 million in revenue to justify the recent price run-up.”
Overall, Wall Street analysts rate Lumen as a “Hold.”
Shares of Lumen were up 41.20% at $7.06 at the time of writing, up 550% from the start of July.