Lumen's valuation is the lowest among the S&P 500's components.
Of the eight worst-performing names in the index so far in 2023, seven are beaten-down bank stocks, including SVB Financial Group SIVB and Signature Bank SBNY, whose corresponding banks have collapsed and been taken over by the government. SVB and Signature shares are halted and are due to be booted from the S&P 500 SPX after today.
Lumen shares fell 20.8% in the session following the company’s latest earnings report, which brought a downbeat outlook. Shares closed at $3.95 after that early February report, and they’ve continued to sink since then. They finished the past two sessions at $2.60, their lowest closing level since Jan. 15, 1988, according to Dow Jones Market Data.
Lumen’s recent stock slide prompted one bearish analyst to ask whether sentiment was too negative. MoffettNathanson analyst Nick Del Deo remarked in an early March note that “everything has a price,” adding that “the sharp deterioration in the stock price and the market’s expectations for the company made us think: would an upgrade, even if tactical in nature, be appropriate?”
“Lumen’s market capitalization of [circa $3 billion] is dwarfed by a debt stack of more than $20 [billion],” he wrote. “We have also seen a dramatic selloff in Lumen’s debt, with several ratings agency downgrades.” Lumen’s near-term liquidity profile looks solid, in Flannery’s view, and the company should benefit financially in 2024 from the sale of its business in Europe, the Middle East and North Africa.
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