- Lumen Technologies (NYSE:LUMN), a global communications services stock, has seen considerable attention on Reddit as of late
- The company recently partnered with Microsoft to bolster their capabilities to meet AI demand
- Lumen stock has given back more than 90 per cent since its all-time-high in 2007, but it has risen by more than 200 per cent since announcing its deal with Microsoft
After Google’s Gemini copped out of listing the most popular stocks on Reddit today, I had to go at it alone and scroll in search of a trend. A romp through the sub-reddit, r/wallstreetbets, the epicenter of the pandemic meme stock craze, turned up multiple mentions of Lumen Technologies (NYSE:LUMN), market capitalization US$5.45 billion, a global communications services stock that has seen considerable attention across investing-related sub-reddits since its partnership with Microsoft (NDAQ:MSFT) announced on July 24.
The partnership will see Lumen optimize its operations by integrating Microsoft’s cloud and artificial intelligence (AI) technology, leading to an expected US$20 million increase in cash flow over the next year, while Microsoft will rely on Lumen to improve its datacentre network’s stability, capacity and performance to better meet growing AI demand.
Lumen stock has added 222.37 per cent since the announcement, prompting renewed interest in the fiber network specialist and the potential opportunity it represents, with the stock having given back almost 90 per cent of its value since its all-time-high of US$49.45 in 2007, last trading at only US$5.38 per share.
From a balance-sheet perspective, Lumen looks unattractive, as evidenced by its five consecutive years of decreasing revenue from US$21.4 billion in 2019 to US$14.45 billion in 2023, primarily driven by COVID, a change in management and ensuing divestitures from Canada, the United States and the Europe, Middle East and Africa region.
That said, the company sees this trend reversing, with up to US$5 billion in AI deals recently secured and a further US$7 billion under discussion, including its project with Microsoft, and president and chief executive officer Kate Johnson sensing that Lumen is on the leading edge of “one of the largest expansions of the internet ever.”
According to Statista, the global AI market will grow more than fourfold from US$184 billion in 2024 to US$826.73 billion in 2030, offering Lumen a strong tailwind on which to leverage Microsoft’s capabilities towards greater market share.
If you’re interested in building a position in Lumen Technologies over the long term, look for operating expenses to come down and gross profitability and free cash flow to trend upward before increasing beyond a nominal allocation.
If you’re keen to play Lumen with a short-term trade, look for a bounce-back from Wednesday’s Q2 2024 earnings report, which tanked the stock by more than 18 per cent in Thursday trading.
Join the discussion: Find out what everybody’s saying about this picks-and-shovels AI stock on the Lumen Technologies Inc. Bullboard, and check out Stockhouse’s stock forums and message boards.
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(Top photo of Lumen’s chief executive officer, Kate Johnson: Lumen Technologies)