Lumen Earnings: Signs of Stabilization and Optimistic Rhetoric With a Long Road Ahead

It appears Lumen sufficiently prepared the market for a year of atrocious financial metrics as first-quarter results were generally in line with—but not much better than—the very low bar management has set for 2023. We did see a couple of encouraging nuggets and we thought the new management team struck a more optimistic tone regarding its long-term plan. We’ve acknowledged the impaired performance that we expect from Lumen over the long term, but we still think the market is too pessimistic in seemingly predicting a death spiral. Unless management’s plan is such a flop that Lumen’s cash flow continues to deteriorate from here, we think the stock is materially undervalued relative to our $5 fair value estimate.