Lumen Technologies Inc. shares skyrocketed up to 93% in post-market trading on Tuesday, continuing an impressive rise following a record one-day increase in the regular trading session.
The surge was fueled by enthusiasm for artificial intelligence and its potential benefits for the company. In their earnings report released after the market closed on Tuesday, Lumen significantly raised its free cash flow forecast for the year to between $1 billion and $1.2 billion, up from a previous estimate of $100 million to $300 million. Wall Street analysts had anticipated the forecast to be around $217 billion, according to Bloomberg data.
Prior to the earnings announcement, Lumen’s stock had already seen substantial gains. The stock closed 93% higher on Tuesday, marking the largest increase on record and reaching its highest value since February 2023, after the company announced $5 billion in new business driven by AI demand and ongoing discussions for an additional $7 billion in potential sales.
Lumen’s performance comes at a time when investors are becoming increasingly cautious about AI investments, as recent earnings reports from major technology companies have highlighted increased spending with minimal returns. The Nasdaq 100 Index has recently entered correction territory, impacted by declines in AI-focused companies like Nvidia Corp., Microsoft Corp., and Amazon.com Inc.
In response to the growing demand for AI, Lumen also announced plans to increase its capital expenditures. “Lumen appears poised to construct new facilities to tap an emerging opportunity for AI-related data center interconnect, as management raised 2024 capex guidance by $400 million,” noted Bloomberg Intelligence analyst John Butler. However, he cautioned that the amount of revenue generated and the timing remain uncertain.
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Butler also mentioned that a significant portion of the company’s increased cash flow, approximately $700 million, was due to a one-time tax refund rather than AI.
Despite the surge in stock price, Wall Street analysts remain largely skeptical of Lumen, with no buy ratings, seven holds, and six sells, according to Bloomberg data. Nonetheless, the stock has soared, gaining more than 350% from the beginning of July through Tuesday’s close.
Source: Bloomberg
