CTL - CenturyLink

[LC]

Lumens measure light. Light creates heat. Heat rises. Therefore, the stock price must rise.

 

This is the type of simple stuff - the blocking and tackling that superior, effective management can accomplish!

[Guest longinvestor]

LUMN is following the same old script towards investment grade. Looks attractive with the dividend. With recent move to strategic BU’s they’re separating out the dogs. Potential sale?

[JRM]

I think part of the value with companies like CenturyLink is the "real estate" value; whether its actual easements or a pole attachment.

 

I wonder if the legacy copper business gives them access to easements that make it easier to build out fiber.  I've seen them build out some fiber to the home where they have legacy copper.  Doesn't seem to be a primary focus.

 

A year or two ago the FTC changed a rule about pole attachments.  The new rule states that utility approval (owner of the pole) is not required to review\approve new attachments if an existing attachment exists.  This is pretty huge for companies like CenturyLink that have existing fiber attachments.  It will be cheaper for the communication companies looking to roll out 5G to work with companies with existing attachments and easements.

[LearningMachine]

Lumens measure light. Light creates heat. Heat rises. Therefore, the stock price must rise.

 

This is the type of simple stuff - the blocking and tackling that superior, effective management can accomplish!

 

While they keep the printing machines on for themselves :-).  In 2019 Annual report, weighted average shares outstanding was 1.071441 Billion. In the most recent 10Q, shares outstanding are 1.09713123 Billion.

 

In the middle of the pandemic, lined their pockets with 25.69 million shares, while diluting the shareholders by 2.4%.  Legal taking of the property of shareholders!

[JRM]

I've been trying to figure out what's behind the volatility in LUMN the past week.  The easy explanation is that it got caught up in the Robinhood circus.  It doesn't appear to be one of the 50 'banned' stocks on Robinhood, though.  It seemed to trade opposite of the market, and there was no news announced so I think this is the most likely explanation.  I can't figure out why the mob would target LUMN when the short interest was around 10% going into the week. 

 

I trimmed a little bit of my position when it was around $15 and sold some deep OTM calls on the rest.

[SI]

It is actually a really decent target for a squeeze. It’s the first squeeze candidate in the S&P 500 as far as i can tell. Of the 14 covering analysts there is only 1 buy rated and its even in rarer air with the majority sell rated meaning wall street cannot come help the funds by downgrading. The indexes are here in mass as a result, in fact the largest two active managers involved both have board representatives with at least one of 2 frozen by an nda. The largest active manager outside those passive managers owns just 90bps at Alpine.

 

As far as Lumen goes have roughly triple the debt that they have market cap so when you move it, not only are your indexes force buying any HF that wants to pile on can short the debt have a 2x positive carry(div yield 2x bond yield on a mid 30s payout ratio) which is a huge lever. Besides having no institutional guys to sell, the funds there for income even at elevated prices still have divd yields they cant replace. A lot of the rest is held by retirees which again depend on the income and who may have had stock from the 30 predecessor companies some of which go back over 3 decades. My point here is that potential sellers in a squeeze are few and far between.

 

Maybe the strongest point is that there is no chance at supply unlike amc or american air. The owners on the board have talked about $30 being fair value and over the summer the mgmt team presented a slide that said $25+ so you aren’t going to see any issuance here.

 

In short, whoever is squeezing seems to either coincidentally picked a strong candidate but i do not believe this is a coincidence.

[Valuehalla]

I've been trying to figure out what's behind the volatility in LUMN the past week.  The easy explanation is that it got caught up in the Robinhood circus.  It doesn't appear to be one of the 50 'banned' stocks on Robinhood, though.  It seemed to trade opposite of the market, and there was no news announced so I think this is the most likely explanation.  I can't figure out why the mob would target LUMN when the short interest was around 10% going into the week. 

 

I trimmed a little bit of my position when it was around $15 and sold some deep OTM calls on the rest.

 

For app 1 day there was a stupid message posted on WSB about a 911 emergency call -line that was fixed by CTL (LUMN). That was the day LUMN surged. The post seemed funny, but probably triggered the run (?)

[SafetyinNumbers]

I've been trying to figure out what's behind the volatility in LUMN the past week.  The easy explanation is that it got caught up in the Robinhood circus.  It doesn't appear to be one of the 50 'banned' stocks on Robinhood, though.  It seemed to trade opposite of the market, and there was no news announced so I think this is the most likely explanation.  I can't figure out why the mob would target LUMN when the short interest was around 10% going into the week. 

 

I trimmed a little bit of my position when it was around $15 and sold some deep OTM calls on the rest.

 

What do you think it's worth if you don't mind me asking?

[SI]

They are doing ~$2.75/share in fcf. Telecom historically trades at 10x fcf. The caveat is that the market must be comforted that fcf is sustainable and the debt level is appropriate. At $31-32bn in net debt, they have $3-4bn of leverage above their target leverage. Based on 1.08bn shares and that thought process you take $3.50 off that price until the rest of the excess leverage is gone(call it 2 years based on the $1.5bn of annual debt retirement they’ve been averaging). Fcf has been flat to up but its the core question here because the asset value is well in hand.

[JRM]

I've been trying to figure out what's behind the volatility in LUMN the past week.  The easy explanation is that it got caught up in the Robinhood circus.  It doesn't appear to be one of the 50 'banned' stocks on Robinhood, though.  It seemed to trade opposite of the market, and there was no news announced so I think this is the most likely explanation.  I can't figure out why the mob would target LUMN when the short interest was around 10% going into the week. 

 

I trimmed a little bit of my position when it was around $15 and sold some deep OTM calls on the rest.

 

What do you think it's worth if you don't mind me asking?

 

I seem to be anchored to $30 within 3 years, but I think it could trade higher in a scenario where revenue stabilizes and debt is paid down.  The narrative surrounding the company would have to change from copper telephone company to a massively under-utilized fiber backbone.

[SafetyinNumbers]

I've been trying to figure out what's behind the volatility in LUMN the past week.  The easy explanation is that it got caught up in the Robinhood circus.  It doesn't appear to be one of the 50 'banned' stocks on Robinhood, though.  It seemed to trade opposite of the market, and there was no news announced so I think this is the most likely explanation.  I can't figure out why the mob would target LUMN when the short interest was around 10% going into the week. 

 

I trimmed a little bit of my position when it was around $15 and sold some deep OTM calls on the rest.

 

What do you think it's worth if you don't mind me asking?

 

I seem to be anchored to $30 within 3 years, but I think it could trade higher in a scenario where revenue stabilizes and debt is paid down.  The narrative surrounding the company would have to change from copper telephone company to a massively under-utilized fiber backbone.

 

Thanks. Both very helpful.