On Wednesday, TD Cowen adjusted its outlook on Lumen Technologies, Inc. (NYSE:LUMN) shares, reducing the price target to $2.50 from the previous $3.50, while maintaining a Hold rating. The revision follows Lumen's financial performance, which revealed lower than expected revenue in several key segments. Despite this, the company affirmed its financial guidance for the year.
The firm's Large Enterprise, Public Sector, and Mass Market divisions all reported revenues below expectations, although Fiber Key Performance Indicators (KPIs) were positive. The Mid-Market segment's performance aligned with forecasts.
However, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) were below anticipated levels. Management attributed the sales challenges to Transitional Service Agreement (TSA) friction and identified the first quarter as the lowest point for EBITDA as they work towards the 2024 guidance.
Lumen's management remains optimistic about the future, anticipating an increase in EBITDA throughout the year. They also mentioned that options for the Mass Market segment are still on the table. Despite these forward-looking statements, TD Cowen is awaiting further evidence of a revenue turnaround before adopting a more positive stance on the company's stock.
The firm's analysis suggests that while EBITDA is expected to improve, it will likely fall short of the company's targets. TD Cowen's position reflects a cautious approach, looking for additional proof points that could signal a revenue inflection for Lumen Technologies before considering a more bullish recommendation.
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