Raymond James has moved Lumen Technologies Inc (NYSE:LUMN) from an Outperform rating to Market Perform, concluding that much of the value tied to deleveraging has already been realized and that the next phase of shareholder value hinges on restoring top-line growth.
The brokerage noted that Lumen’s sale of fiber assets to AT&T materially improved the company’s financial position, reducing leverage by roughly one turn to a level below 4x. That balance sheet reset leaves Lumen in a more secure financial posture, the firm said, able to fund operations and make growth investments. Raymond James also observed that management could consider share repurchases even before revenue turns positive.
Yet with the immediate benefits of deleveraging largely captured, Raymond James said the company’s future upside now depends on a sustained return to revenue expansion. Management has indicated that such an inflection point is about two years away. The brokerage expects additional detail at Lumen’s forthcoming analyst day but flagged a number of execution uncertainties that could delay progress.
Among the execution concerns, Raymond James highlighted the recent turnover in sales leadership - Lumen has appointed its third head of sales in three years - a type of change that the firm said can pause growth before improvements emerge.
The analyst house also pointed to reduced near-term clarity around Lumen’s AI-related fiber builds. Management disclosed $2.5 billion of new Private Connectivity Fabric deals signed in the fourth quarter, and Raymond James noted these contracts typically generate most revenue up front over several years. However, the brokerage said that efforts to expand beyond hyperscaler customers and project timelines stretching into the next decade complicate the ability to reflect these deals in near-term valuation.
On performance metrics, Lumen reported fourth-quarter pro forma revenue of $3.04 billion and adjusted EBITDA of $771 million, versus Raymond James’ forecasts of $3.15 billion and $774 million, respectively. Business revenue declined 8.8% year over year.
Following the debt reduction, the stock trades at about 6x 2026E EBITDA - a multiple that Raymond James notes sits below the broader telecommunications group. Given that key growth catalysts have been largely realized and revenue recovery appears further out, the brokerage judged a Market Perform rating to be appropriate for the company at this stage.
Contextual note: The firm is anticipating more detail at Lumen’s analyst day, where management may provide further clarity on the timing and execution plans for revenue recovery and fiber buildouts.