Lumen Technologies Gains Momentum with Private Connectivity Sales and Quantum Fiber Outlook Shares of Lumen Technologies (NYSE:LUMN) climbed 2% in premarket trading on Friday after Wells Fargo upgraded the telecom company, citing multiple growth catalysts including private connectivity fabric sales and the potential for its Quantum Fiber unit.
Private Connectivity Fabric Sales Drive Free Cash Flow Wells Fargo analysts highlighted that the $8.5 billion in private connectivity fabric sales announced so far have significantly boosted Lumen’s free cash flow (FCF) for 2024 and 2025 by approximately $2.5 billion. Although the firm anticipates FCF turning negative in 2026 due to higher capital expenditures and increased cash taxes, analysts expect additional dark fiber sales in 2025 to provide another FCF boost.
“Regardless, with more than $2 billion of cash available by YE’25 and EBITDA improving by 2026, Lumen’s liquidity position has been substantially boosted,” Wells Fargo analysts noted in a client report.
Quantum Fiber Sale Could Unlock Additional Value Analysts also pointed to a potential sale of Lumen’s Quantum Fiber business as a key upside catalyst. If Lumen were to carve out and sell its fiber unit, it could be valued at approximately $6 billion and contribute at least $800 million to the company’s free cash flow by 2026. Additionally, such a move could reduce Lumen’s net leverage by more than 1x by 2026.
Potential Mass Markets Business Sale Worth $8 Billion Another strategic option under consideration is the potential sale of Lumen’s entire Mass Markets business. Analysts estimate that this business could fetch around $8 billion, boosting free cash flow by $200 million while reducing net leverage by approximately 0.5x by 2026.
Wells Fargo Raises Rating and Maintains $5 Price Target Given these favorable developments, Wells Fargo upgraded Lumen Technologies from Underweight to Equal-Weight and reiterated its $5 price target. Analysts believe that while challenges remain, Lumen’s strategic initiatives, coupled with strong liquidity and improving EBITDA, position the company for significant financial flexibility and potential upside in the coming years.
