Lumen Technologies (NYSE: LUMN) stocks see big sell-off in Tuesday’s trading. The company’s stock price fell 9.3% as of 3:00 PM ET. and was down as much as 11.7% earlier in the daily session. Meanwhile, the S&P500 index fell by 0.5%.
Lumen shares are losing ground in combination with the news that the company and its subsidiary Level 3 Financings want to buy back some of the outstanding telecom sector bonds. The company issued a press release this morning announcing that it had made offers to repurchase debt securities totaling $945 million.
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In addition to a moderate pullback for the broader market today due to recent gains, Lumen stock is facing valuation pressure related to the bond buyback offer. Together with its Level 3 Financing subsidiary, Lumen has made cash offers to repurchase all of its outstanding unsecured debt securities. The offering includes eight different sets of notes with different interest rates and maturity dates, and the two parties are offering between $0.86 and $1 for every $1 of principal.
Lumen has seen recent improvements in business performance and demand prospects thanks to rising AI-related demand for networking technologies and related services. Coupled with improving fortunes, the company is taking steps to reduce its debt and limit interest costs. Reducing debt would be a positive development in important respects, but investors may interpret this move as an indication that the company thinks its money would be better spent reducing debt rather than investing in growth initiatives.
Thanks to private connectivity fabric (PCF), this is about to happen Microsoft, Metaplatformsand other customers, Lumen stock has been favored as an artificial intelligence (AI) this year. Even with today’s pullback, the company’s stock price is up more than 400% in 2024 trading.
Lumen could still be in the early stages of rising AI-related PCF demand, and additional deals could significantly boost the company’s free cash flow. If so, the company would be in a good position to continue paying down debt – and its share price could continue to rise. On the other hand, it remains to be seen whether PCF technologies will ultimately become a long-term performance driver for the company – and there is a risk that the company’s valuation has become too high due to recent business improvements and AI-driven excitement.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Meta Platforms and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Why Lumen Technologies Stock Is Sinking Today was originally published by The Motley Fool
