Lumen (LUMN +0.24%) stock got hit hard in Tuesday's trading. Its share price was down 10% just before market close on news that the company could wind up selling one of its units to AT&T. The stock had been down as much as 18.7% earlier in the day.
Bloomberg published a report today suggesting that AT&T could wind up buying Lumen's consumer-facing fiber internet business. Investors clearly aren't happy about the news. The report used unnamed sources.
NYSE: LUMN
Key Data Points
Lumen stock sinks as investors weigh potential AT&T deal impact
According to today's report, AT&T could buy Lumen's consumer fiber business for roughly $5.5 billion. While a sale could generate a significant amount of cash for the debt-laden Lumen, there are good reasons investors investors are having such a negative reaction to the news.
Fiber offerings are a relative standout in Lumen's otherwise struggling consumer business, and selling the unit to AT&T would weaken the broader business significantly. At a $5.5 billion valuation, the market isn't seeing enough return for what Lumen would be giving up.
What's next for Lumen?
If Lumen sells its consumer fiber business, it would likely be a sign of a much bigger shift at the company. Selling the unit to AT&T could make it more sensible for Lumen to continue selling off other parts of its consumer business or even exit the space entirely.
Despite today's big sell-off, Lumen stock is still up roughly 163% over the last year. The big gains have been largely propelled by the company expanding fiber sales to cloud hyperscalers including Microsoft and Meta Platforms in connection with artificial intelligence (AI) data centers. If Lumen does sell its consumer fiber business, it could mean the company is going all in on the enterprise market. Investors will have to watch to see if the Bloomberg report is accurate.
