JPMorgan (NYSE:JPM) has shifted its stance on Lumen Technologies, raising the stock's rating from Underweight to Neutral in view of a series of lucrative deals involving Lumen's Private Connectivity Fabric (PCF (LON:PCF)) solutions, which have reached a collective value of $5 billion.
Furthermore, negotiations are in progress for potential additional deals worth approximately $7 billion.
The analyst from JPMorgan highlighted that the pre-funding of these deals is expected to cover Lumen's liquidity shortfall, thereby providing a pathway to future free cash flow growth. This financial maneuver is also anticipated to enhance the company's balance sheet and leverage profile.
In light of these developments, JPMorgan has updated its financial model for Lumen to incorporate the PCF agreements and a new cost-saving program that is projected to yield $1 billion in run-rate savings by the end of 2027.
Despite these positive developments, the analyst noted that the changes are not likely to significantly alter long-term forecasts due to ongoing challenges within Lumen's legacy enterprise operations.
However, the potential for additional AI-related fabric deals could improve market sentiment and lead to positive revisions in financial estimates for the company.
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