Lumen Technologies Inc., a telecommunications company, experienced a significant drop in its share price following its latest earnings report. However, the company's CEO, Kate Johnson, showed confidence in the future by purchasing 1 million Lumen shares at an average price of 97 cents. This transaction, amounting to $970,000, was disclosed in a filing with the Securities and Exchange Commission.
The buying spree by Johnson occurred after Lumen shares witnessed a historic selloff the day prior, with a 32.9% decline to 98 cents. This marked the largest single-day percentage drop ever recorded for the stock. During Thursday's session, shares even hit a low of 78 cents, coinciding with Johnson's purchase. Nevertheless, by the end of that session, the stock had recovered slightly to $1.06. As the week progressed, Lumen shares further climbed and closed at $1.12.
Following this recent acquisition, Johnson now owns more than 5.1 million Lumen shares directly, as reported in Friday's filing.
Lumen Technologies has yet to provide a comment on Johnson's stock purchase.
Since assuming her role as CEO approximately one year ago, Johnson has been entrusted with spearheading a turnaround for the company. Lumen provides a range of services including networking and cloud storage. Over the past year, the company's shares have declined by 81%, while over the past two years, they have plummeted by 91%.
The Transition Challenges for the Company
The company, formerly known as CenturyLink, recently announced a new credit agreement. Alongside this news, the company also revealed its plan to reduce fiber investments and headcount. While these initiatives attempt to bring about positive changes, analysts remain skeptical about the company's transition.
JPMorgan's Philip Cusick expressed reservations about the company's prospects. Despite acknowledging the improved liquidity position and efforts to reinvest for growth at Lumen, Cusick predicts ongoing pressure on the company's fundamentals in 2023 and 2024. He attributes this to years of insufficient investment in the Enterprise asset base and increased competition from fiber overbuilders, fixed-wireless access, and cable providers. This combination of factors is expected to squeeze mass-market revenue, especially as Lumen scales back on its expansion efforts. Given these concerns, Cusick rates the stock as underweight and remains skeptical about its future performance.
Revenue Pressures and Comprehensive Evaluation
MoffettNathanson's Nick Del Deo echoes these concerns and emphasizes the significance of the company's top-line performance. Del Deo notes that without an improvement in this area, it becomes challenging to justify confidence in the rest of the business model. Given the revenue pressures observed in the latest quarter, Del Deo maintains a sell rating and sets a target price of $1.
Overall, as the company navigates its transition, it faces various obstacles that cast doubt on its ability to execute an unproven and capital-intensive strategy successfully.
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