On Monday, RBC (TSX:RY) Capital updated its outlook on Lumen Technologies (NYSE:LUMN), increasing the stock's price target to $1.75, up from the previous $1.25. The firm has maintained a Sector Perform rating on the shares.
The adjustment follows Lumen's announcement of financial results that surpassed expectations, along with the company's initial guidance for 2024. The results reflect the benefits of a Transition Services Agreement (TSA), which according to RBC Capital, offers Lumen additional time to advance its turnaround efforts.
RBC Capital's revised price target is based on an asset-based valuation methodology. This approach takes into account the tangible and intangible assets of Lumen to arrive at the new target.
Lumen's recent performance and the initial guidance for the upcoming year have been critical factors in RBC Capital's reassessment of the stock's value. The TSA's contribution to providing a "longer runway" for the company's management to implement its strategic plans was specifically highlighted by the firm.
Lumen Technologies, which operates in the telecommunications sector, has been working on a turnaround strategy to improve its financial position and market performance. The endorsement from RBC Capital suggests a cautiously optimistic view of the company's progress and future prospects.
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