Lumen Technologies Stock Review: Value Play or Fading Star?

Economic

Summary:

Is Lumen Technologies (LUMN) a smart investment? Dive into a deep analysis of its strengths, weaknesses, opportunities, and threats (SWOT) to understand its future potential and make informed investment decisions.

Lumen Technologies (LUMN), formerly known as CenturyLink, is a major player in the communication infrastructure landscape. The company boasts a vast fiber network across North America and international connectivity, catering to businesses and consumers alike. However, Lumen's stock performance has been lackluster in recent years, prompting investors to question its future potential. This article delves into a comprehensive review of Lumen Technologies, analyzing its strengths, weaknesses, opportunities, and threats (SWOT analysis) to assess its investment viability.

Strengths

Extensive Network Infrastructure: Lumen possesses a robust fiber network, a key asset in the high-speed data transmission era. This network spans vast distances, connecting businesses and consumers across North America and reaching key international markets.

Diversified Revenue Streams: Lumen generates revenue from various sources, including voice, data, internet, and managed services. This diversification helps mitigate risk and provides some stability in the face of fluctuations in any single segment.Established Brand and Customer Base: Lumen has a long history in the telecommunications industry, boasting a well-established brand and a loyal customer base, particularly among enterprise clients.

Weaknesses

Declining Legacy Business: Lumen's traditional voice and data services, particularly in the consumer segment, are facing a decline due to competition from mobile operators and internet service providers (ISPs) offering bundled services.

High Debt Burden: Lumen carries a significant amount of debt, which can limit its financial flexibility and hinder investments in new technologies.

Slow Pace of Innovation: Compared to nimble tech startups, Lumen might be perceived as slow in adopting and integrating cutting-edge technologies.

Opportunities

Growth in Enterprise Services: The demand for high-bandwidth connectivity and cloud solutions is booming in the enterprise sector. Lumen can capitalize on this trend by focusing on managed services and secure network solutions for businesses.

Expansion into Emerging Markets: Lumen has the potential to expand its reach into emerging markets with growing data consumption and infrastructure needs.

Fiber Monetization: Lumen's extensive fiber network presents a valuable asset for 5G rollout and future advancements. The company can explore new ways to monetize its infrastructure by partnering with other players in the telecom ecosystem.

Threats

Intense Competition: The telecommunications landscape is fiercely competitive, with established players and new entrants vying for market share. This competition can put downward pressure on prices and margins.

Regulatory Landscape: The regulatory environment can significantly impact the telecommunications industry. Changes in regulations might affect pricing structures and service offerings.

Technological Disruption: The rapid evolution of communication technologies could render existing infrastructure obsolete if Lumen fails to adapt and innovate.

Investment Thesis

Lumen's stock price has experienced a downward trend in recent years, reflecting investor concerns about its future growth prospects. The company faces challenges from declining legacy businesses, a high debt burden, and a need to accelerate innovation.

However, Lumen also possesses significant strengths, including a vast fiber network, a diversified revenue base, and a loyal customer base. Opportunities exist in the enterprise services sector, emerging markets, and fiber monetization strategies.

The decision to invest in Lumen depends on your risk tolerance and investment horizon. The company offers a potential value play for long-term investors who believe Lumen can overcome its challenges and capitalize on its growth opportunities. However, short-term investors might be better served by looking elsewhere due to the uncertainties surrounding the company's future trajectory.

Analyst Opinions

Analyst opinions on Lumen Technologies are currently mixed. Some analysts see value in the company's assets and potential for future growth, while others remain cautious due to the aforementioned challenges. The average analyst price target suggests modest upside potential, but significant volatility is also a possibility.

Conclusion

Lumen Technologies presents a complex investment proposition. While the company faces headwinds, its strengths and potential opportunities cannot be ignored. A thorough analysis of your risk tolerance and investment goals is crucial before making a decision on whether Lumen belongs in your portfolio. By closely monitoring Lumen's progress in addressing its challenges and capitalizing on its opportunities, investors can make informed decisions about their investment in this telecommunications giant.

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Alex

Economic

The Biden administration is kicking off a program to cultivate the US computer-chip workforce, aiming to stave off a labor shortage that threatens to undermine domestic semiconductor production.

The program, described as a workforce partner alliance, will use some of the $5 billion in federal funding set aside for a new National Semiconductor Technology Center. The NSTC plans to award grants to as many as 10 workforce development projects with budgets of $500,000 to $2 million.

The center also will launch additional application processes in the coming months, and officials will determine the total level of spending once all the proposals have been considered.

The money comes from the 2022 Chips and Science Act, a landmark law that set aside $39 billion in grants to boost US chipmaking, plus $11 billion for semiconductor research and development, including the NSTC. Firms have pledged to invest more than 10 times that in response to the incentives — a surge that’s set to reshape the global supply chain for semiconductors. Monday’s effort is the legislation’s first workforce-focused funding opportunity.

Industry and government officials have warned that those new factories could falter without significant investment in labor. Some estimates project that the US will be short 90,000 technicians by 2030 — when the country aims to produce at least a fifth of the world’s most advanced chips.

“It is imperative that we develop a domestic semiconductor workforce ecosystem that can support the industry’s anticipated growth,” said Michael Barnes, senior manager of workforce development programs at Natcast, the nonprofit organization set up to operate the NSTC.

Since Biden signed the Chips Act two years ago, more than 50 community colleges have announced new or expanded semiconductor-related programs. The four biggest Chips Act manufacturing awards — to Intel Corp., Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Micron Technology Inc. — each included $40 million to $50 million in dedicated workforce funding.

The Commerce Department unveiled its 12th grant from that manufacturing program on Monday: $6.7 million for Rogue Valley Microdevices. That money will support a new Florida factory focused on chips with defense and biomedical applications.

Source:Bloomberg

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Cohen

Economic

As Australia’s domestic economy hits a brick wall sparking concerns of yet higher unemployment, rising mortgage arrears and higher business insolvencies, Australia’s dominant export market – China – is in serious economic trouble.

If we are to see a period of ongoing Chinese economic weakness, it would present deeper problems for an already vulnerable global economy. It would almost inevitably see further weakness in commodity prices and the volumes of goods and services exported by Australian firms, dragging domestic economic growth yet lower.

After what for China is recessionary-like growth of 3.0 per cent in 2022 and a tepid recovery to 5.2 per cent in 2023, GDP growth is forecast to ease back to 5.0 per cent in 2024, dropping further to 4.5 per cent in 2025 and 3.8 per cent in 2026.

By Chinese standards, these are signs of weak and faltering economic activity.

Such is the depth and now duration of the economic slump, that an already moderate peak for inflation of 2.8 per cent in late 2022 has morphed into deflation with the annual change in the CPI stuck between -0.8 per cent and +0.7 per cent since March 2023. And this, it is important to emphasise, is when the bulk of the rest of the world is fighting to return their inflation rates to their respective targets.

As a result of this economic funk, Chinese authorities have slashed interest rates in an attempt to underpin activity and reflate the economy.

What it means for Australia

China is the dominant market for Australia, accounting for one-third of all export values.

This has been a major contributor to Australia’s economic success in recent decades, adding to national income and economic growth.

But it does leave Australia vulnerable to a downswing in China’s economy.

There is growing evidence that the Chinese slowdown is already impacting Australia’s economic performance.

Commodity price crash

The Reserve Bank of Australia's (RBA) index of commodity prices which is based on the relative importance of Australia’s export values, has fallen a massive 26 per cent in Australian dollar terms from the peak in October 2022.

The price of iron ore, Australia’s largest commodity export to China, has fallen from above US$150 a tonne in early 2022 to US$135 a tonne in early 2024 to a current price of around US$107 a tonne.

The impact on Australia is there to see.

Export volumes are topping out and the slump in commodity prices has been one factor behind the fall in Australia’s monthly international trade surplus which in 2022 was generally between $12.5 to $15 billion to current levels around $5 to $7.5 billion a month.

What can be done?

Australian policymakers will be watching trends in China, and the rest of the world, for factors that influence local growth, inflation and financial markets.

It was odd, to say the least, that in making its interest rate decision last month, the RBA noted “there has been improvement in the outlook for the Chinese and US economies, and many commodity prices have picked up”.

Perhaps the RBA had a more gloomy view of China and its assessment was things were ‘less bad’.

There was no elaboration on this point.

But as alluded to above, the RBA’s own index of commodity prices has fallen every month so far in 2024 and Chinese authorities are easing policy in response to its fragile economic conditions.

It is to be hoped the RBA clears up this confusion with the release of the next Statement of Monetary Policy in early August.

Misreading trends in China’s fragile economy would add significantly to the downside risks to the Australian economy which is already flatlining near recession.

Financial markets, which are a good measure of economic health, are painting a concerning picture for China.

The Shanghai Composite Stock Market Index is currently trading around 3,000 points, well below the 2021 peak above 3,600 and the 3,300 point level a year ago.

The 10-year government bond yield has fallen to a record low of 2.25 per cent as the weak economy and disinflation problems impact sentiment and investment activity.

It is to be hoped the Chinese economy registers a sustained recovery soon, as it is a driver of global growth and Australian exports.

But until it does, there are more downside risks to the troubled Australian economy, which should be featuring prominently in the RBA monetary policy deliberations.

A more material weakening in China would demand the RBA cut interest rates to help insulate the Australian economy from the fallout.

Source:Yahoo Finance

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Samantha Luan

Economic

Central Bank

South Korea’s inflation slowed more than expected ahead of a key central bank meeting, offering more evidence that price pressure is easing in a path that may allow policymakers to soften their restrictive policy settings in coming months.

Consumer price growth eased to 2.4% from a year earlier, the slowest pace since July last year and marking a deceleration from 2.7% in May, according to data released by the statistics office on Tuesday. The latest reading was below the lowest projection by economists in a Bloomberg survey that had a median forecast of 2.6%.

Price pressure excluding food and energy also stayed stable, with the core gauge rising 2.2% from a year earlier, the same as in May. Core inflation has slowed or been flat every month since March last year.

South Korea’s Cooling Inflation May Boost BOK Policy Pivot Bets_1

The data come a little more than a week before the Bank of Korea holds a meeting to map out a clearer course for its benchmark interest rate that stands at 3.5%, a level it characterizes as restrictive. The central bank has said it might consider easing policy should authorities gain confidence prices will cool as expected.

The extent to which inflation moves toward the BOK’s target of 2% will be a key factor as the central bank mulls the timing for a potential interest rate cut. Governor Rhee Chang-yong last month called for a balanced approach in considering a pivot, invoking a Latin expression Festina Lente to convey the importance of balancing urgency with diligence.

A growing number of economists is betting a pivot could come as early as August as inflation moves largely in line with BOK forecasts.

While the inflation rate coming down to the mid-2% level is “positive,” it’s still necessary to see if price pressure will continue to converge toward the target, the BOK said in a statement following the data. Uncertainties linger over international oil prices, weather conditions and public utility charges, it said.

For now, a continued export rally led by semiconductors and automobiles is giving the central bank confidence the economy can withstand its current restrictive policy settings. Also, the won remains among the currencies that have lost the most this year against the dollar. If authorities moved too quickly to reduce rates, it could spur further currency depreciation, raising the costs of imported raw materials, food and energy.

“Inflation is slowing faster than thought, but policymakers will also have to consider from the perspective of foreign exchange markets,” KB Securities economist Gweon Heejin said.

Gweon added the trickle-down effect from exports to domestic consumption remains weak, a view that jibes with the BOK assertion that a faster economic expansion won’t necessarily lead to stronger consumer-price pressure. She expects the BOK to embark on a pivot after the Federal Reserve moves in that direction potentially as early as in September.

At the same time, policymakers are concerned about being too slow to lower rates as credit risks in the construction industry continue to cast a shadow over the economic outlook. Meantime, private consumption also remains lackluster, with retail sales growth having slowed for a third straight month in May.

South Korea’s Cooling Inflation May Boost BOK Policy Pivot Bets_2

“The risks of a too-early shift include delayed convergence of inflation to the target, increased FX rate volatility, and a re-acceleration of household leverage growth,” JPMorgan Chase Bank economist Seok Gil Park wrote in a note before the data release. “Conversely, the risks of a too-late shift include a widening gap between robust exports and softer domestic demand, as well as financial market instability likely due to delinquencies in real estate market-related leverages.”

The BOK is expected to stand pat at its next decision on July 11, with focus falling on any fresh hints about the timing of a shift toward monetary easing. When it last met in May, the board unanimously held the benchmark rate unchanged at 3.5%, a level that has been maintained since January last year.

At its last meeting, the BOK also maintained its inflation forecast for 2024 at 2.6% while raising the economic growth forecast to 2.5% from 2.1%. The revision of the GDP forecast reflected a first-quarter expansion that was faster than expected, with demand from the US providing a key source of momentum at a time when China is struggling to rebound economically.

While China’s central bank is attempting to support the economy, the Federal Reserve is staying cautious about prospects for policy loosening. The US monetary trajectory is a key factor the BOK is monitoring as South Korean officials remain wary of rate differentials between the two nations.

Tuesday’s inflation report showed South Korea’s food and non-alcoholic beverages saw a price rise of 3.8% from a year earlier in June. The prices of clothes and shoes increased 2.6%. Utility costs rose 1.2% and the prices of transportation increased 3.9%. Communications costs edged up 0.3%.

Source:Bloomberg

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FastBull Featured

Daily News

[Quick Facts]

1. Lagarde says ECB needs time to weigh inflation uncertainties.

2. ECB's Wunsch would need convincing for more than two 2024 cuts.

3. ECB's Simkus says the case for a July interest-rate cut has gone.

4. U.S. manufacturing activity contracts in June.

[News Details]

Lagarde says ECB needs time to weigh inflation uncertainties

The European Central Bank (ECB) doesn't yet have sufficient evidence that inflation threats have passed, ECB President Christine Lagarde said on Monday. With the euro-zone job market remaining robust, the ECB has time to assess incoming information. It's too soon to claim victory after the spike in prices, Lagarde said.

We still face several uncertainties regarding future inflation, especially in terms of how the nexus of profits, wages and productivity will evolve and whether the economy will be hit by new supply-side shocks. It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed, Lagarde said.

ECB officials' assessment of the inflation outlook is "based on, but not limited to, our forecasts." Policymakers will not be sidetracked by any particular piece of information.

Lagarde's remarks were hawkish, cooling market expectations for a July rate cut.

ECB's Wunsch would need convincing for more than two 2024 cuts

European Central Bank Governing Council member Pierre Wunsch would need to be thoroughly convinced that inflation was headed back to the 2% target in order for him to back more than two reductions in interest rates this year. The first two rate cuts are relatively easy as long as inflation hovers around 2.5% because we will still clearly be restrictive.

Markets reckon there will be one or two more reductions this year - a scenario that "looks reasonable," according to Wunsch. But he signaled that this month's meeting may be too soon for a second cut.

ECB's Simkus says the case for a July interest-rate cut has gone

ECB Governing Council member Gediminas Simkus said on Monday that two more 2024 cuts are possible if the data develops as expected. Officials shouldn't limit rate moves to projection meetings. If they agree that a rate cut is necessary at other meetings, they should lower rates. The case for a July interest-rate cut has gone.

U.S. manufacturing activity contracts in June

The U.S. ISM Manufacturing PMI slipped to 48.5 last month from 48.7 in May, lower than the expected 49.1. It has been below 50 for the third consecutive month. In addition, the ISM Manufacturing Prices Paid Index declined to 52.1 in June, the largest decline since May 2023. While the overall manufacturing index continues to show contracting activity, the rebound in the ISM New Orders Index is a positive sign for producers. The index rebounded by nearly four points to 49.3, indicating that bookings are stabilizing.

Meanwhile, the ISM Production Index slipped from 50.2 to 48.5, and manufacturing employment declined. The figures indicate U.S. manufacturing continues to struggle for momentum due to high borrowing costs, restrained business investment in equipment and uneven consumer spending as the Federal Reserve keeps interest rates higher for longer.

The ISM manufacturing survey was weaker than expected overall, with weaker-than-expected headline readings, employment and price indices. The new orders index was slightly higher than expected. The inventory sub-index fell quite sharply from 47.9 to 45.4. Manufacturing remains sluggish, recovery is under pressure, and inflation is showing signs of cooling.

[Focus of the Day]

UTC+8 15:30 ECB Vice President Guindos Participates in a Discussion

UTC+8 16:30 ECB Executive Board Member Elderson Speaks

UTC+8 17:00 Eurozone HICP (Jun)

UTC+8 21:30 Fed Chair Powell, ECB President Lagarde, and Brazilian Central Bank President Neto deliver speeches at the ECB Forum on Central Banking.

UTC+8 22:00 U.S. JOLTs Job Openings (May)

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Alex

Britain’s next government is poised to benefit from easing pressure on household finances after a slowdown in inflation in stores and a fall in fuel prices, but costs remain “too expensive” for many families.

Figures from the British Retail Consortium (BRC) show that annual UK shop price inflation cooled last month to 0.2%, down from 0.6% in May – the slowest pace since October 2021 – as retailers cut the prices of many of their key products, including butter and coffee.

Coming before Thursday’s general election, separate figures from the RAC show that petrol and diesel prices fell for a second straight month in June to ease pressure on families affected by the cost of living crisis. The organisation said, however, that filling up on the forecourt was still “too expensive” in England, Wales and Scotland.

According to the RAC’s monthly fuel watch, the average price of petrol in the UK at the end of June was just under 145p a litre, down from 148p at the start of the month. Diesel dropped from nearly 154p to about 150p.

“Fuel prices are still nowhere near where they should be despite falling for the second consecutive month,” the RAC said. It highlighted the lower cost of filling up in Northern Ireland, where petrol is 4.5p a litre cheaper on average and diesel 8p cheaper than in the rest of the UK.

The RAC’s head of policy, Simon Williams, said: “While it’s good news prices at the pumps have fallen for the second month in a row, this also leaves a bad taste in the mouth because we know drivers in Great Britain are continuing to get a raw deal as both petrol and diesel are still much more expensive than in Northern Ireland.”

He said prices at forecourts owned and run by Shell and BP were the most expensive, highlighting Competition and Markets Authority data showing that Shell-owned sites were the most expensive in the UK.

“We remain baffled how the very same fuel can be sold for such vastly different prices by the biggest retailers, whether they’re run by supermarkets or the world’s largest oil companies,” he said.

Rishi Sunak has made lower inflation the cornerstone of the Conservatives’ general election campaign after a return in the official headline rate to the Bank of England’s target of 2% in May, down from a peak of 11.1% in October 2022.

The shadow chancellor, Rachel Reeves, however, has said pressure on household finances remains “acute” as average prices remain significantly higher than before the cost of living crisis took hold.

According to the latest snapshot from the BRC, food inflation slowed to 2.5% in June, down from 3.2% in May, in the 14th consecutive deceleration for annual growth in grocery prices. The figures suggest average prices in UK shops are continuing to rise, albeit at a slower pace than in previous months.

The chief executive of the BRC, Helen Dickinson, said retailers had, however, cut the prices of some key products including butter and coffee. Non-food prices were also in deflation – meaning average prices are falling compared with a year earlier – as shops tried to boost their sales by discounting products.

“This was particularly true for TVs with great deals to capitalise on the Euros fever,” she said. “Whoever wins Thursday’s election will benefit from the work of retailers to cut their costs and prices, easing the cost of living for millions of households.”

Source:The Guardian

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Alex

Economic

Central Bank

Has the worst been dealt with after the inflation shock? According to European Central Bank (ECB) President Christine Lagarde, the economy could still face new supply-side shocks. This is also evident from a look at past crises, where "soft landings" were rarely successful.

The European Central Bank (ECB), according to its President Christine Lagarde, cannot yet be certain that it has won the battle against inflation. As Lagarde stated at the opening of the monetary policy symposium in Portugal's Sintra, the ECB is also unsure if its monetary policy might not still lead to a recession.

"There are still uncertainties regarding future inflation, particularly with regard to how the interlinkages between profits, wages, and productivity will develop and whether the economy will be hit by new supply shocks," Lagarde said, according to the published speech text. "It will take some time before we have collected enough data to be certain that the risks of inflation overshooting the target have passed," she added.

Given the magnitude of the inflation shock, Lagarde stated that a "soft landing" is still not guaranteed. "A look at historical interest rate cycles since 1970 shows that the costs for the economy are usually quite high when the major central banks raise interest rates at high energy prices," Lagarde said. Only about 15% of the successful soft landings in this period - defined as avoiding a recession or a significant worsening of the employment situation - have been achieved following energy price shocks.

"The strong labor market means we can take our time to gather new information, but we must also be aware that growth prospects remain uncertain," said the ECB President. All this underscores the determination to be data-dependent and to make political decisions from meeting to meeting.

Despite the assertions of Financial regulation being effective in mitigating economic instability, Christine Lagarde, the ECB President, emphasizes the potential for new supply-side shocks in Financial markets. The ECB, under Lagarde's leadership, is carefully considering the impact of its monetary policy on the economy to prevent inadvertently triggering a recession, demonstrating the complexity of Financial regulation in practice.