What happened
Lumen Technologies (LUMN), a low-priced stock that tends to be volatile, had an unfavorable trading session on Tuesday. The company's share price took a more than 5% hit following an analyst's rather deep price target cut. That decline was well steeper than the 0.4% dip of the S&P 500 index on the day.
So what
The person behind the downgrade was Simon Flannery at ever-influential investment bank Morgan Stanley. Before market open, Flannery reduced his price target on Lumen stock to $1.80 per share; that's quite some distance below his previous $2.50 level.
The reasons for Flannery's chop weren't immediately apparent, but the move is only the latest blow putting the hurt on the struggling telecom stock. It's been especially out of favor over the last month or so, following the release of its latest set of quarterly results at the beginning of August.
There wasn't a great deal to like in Lumen's second-quarter earnings. Revenue fell by 22% year over year and missed (if only slightly) the average analyst estimate.
A massive noncash goodwill impairment charge resulted in a deep headline net loss of almost $8.8 billion; even when adjusted for extraordinary items like that charge, profitability was down notably compared to the year-ago period.
Now what
Lumen is still very much a company struggling to get on its feet and right its business. It is still heavily in debt, and it operates in a fast-moving sector that requires companies to spend vast amounts of capital to stay competitive. We shouldn't be surprised to see more price cuts in the coming weeks and months if it can't show meaningful financial or operational improvement.
