Shares of Lumen Technologies Inc. fell to levels not seen since 1988 Wednesday as the company, which provides voice, broadband and other services, pressed the reset button and disappointed Wall Street with its outlook.
While Lumen's LUMN, earnings and revenue surpassed the consensus view, Lumen came up far short in its 2023 projections for free-cash flow and adjusted earnings before interest, taxes, depreciation and amortization Ebitda We need to do a lot of things, some basic and some quite complex, to take advantage of the opportunity that lies ahead of us, Chief Executive Kathleen Johnson said on the earnings call. She said that 2023 will be a year of rapid change for Lumen. The stock was off 19.7% in Wednesday morning trading, and on track for its worst single-day decline since Jan. 28, 21, when it fell 22.5%. This would be the second sharp post-earnings stock plunge for Lumen in a number of reports, as the name fell 17.7% after the company delivered results and eliminated its dividend in November.
The company's shares recently changed hands at $4.02, they are on track to post their lowest close since Aug. 23, 1988, when they finished at $3.90, according to Dow Jones Market Data.
After the report, analysts were fairly blunt with their assessments, with SVB MoffettNathanson s Nick Del Deo writing that he sounded a lot of the lats when he spoke with a positive bias on the stock.
The most common question we received from clients recently was: Have numbers fallen enough? Del Deo asked. It has been a while since we have seen a miss of this magnitude. He noted that Lumen's adjusted Ebitda forecast fell short of expectations by about 10%.
While Lumen is under new leadership, Del Deo was skeptical that the company's problems could be solved by a different view from management.
He wrote that the company has significant legacy revenue streams, an increasingly competitive and increasingly commoditized commercial wireline market characterized by high fixed and low variable costs, an increasingly hard to rationalize expense base, and so on.
Del Deo rated the stock as underperform with a $4 target price.
Michael Rollins, Citi Research analyst, downgraded the stock to sell from neutral and cut his price target to $3.50 from $6.25.
He wrote that there were headwinds from inflation, divestiture dis-synergies, new investments were well ahead of our 2023 expectations without a relief valve from cost-reductions for what was depicted as a reset-year.
Although executives were prioritizing investments to increase future revenue, he worried that the efforts may not materialize as expected or under the right timeframe.
Cowen analyst Gregory Williams wrote that Lumen s management cleared the decks with the forecast but said it was too early to assess if the new strategy will correct the ship compared to the many prior strategies. He is watching for more information coming out of the company's June 5 analyst day and looking for signs of less steep declines going forward.
Williams rates the shares at market perform, and he reduced his price target to $4.50 from $8.