We recently published a list of 10 Stocks Jim Cramer is Talking About. In this article, we are going to take a look at where Lumen Technologies Inc. (NYSE:LUMN) stands against other stocks Jim Cramer is talking about.
On a recent episode of Mad Money, Jim Cramer suggests that perhaps we are misjudging the retail sector. He argues that the debate over whether consumers are sick, well, frugal, or stressed might be misguided. According to Cramer, consumer behavior doesn’t shift dramatically overnight; people don’t suddenly change from being sick to well within a single quarter. As we look ahead to the Fed’s discussion at Jackson Hole on Friday, with the market averages rising by 56 points and the S&P 500 increasing by 42%, it’s clear we need to reassess our views on the consumer’s state.
“Maybe we’re looking at retail all wrong. Perhaps this whole discussion about whether the consumer is sick, well, frugal, or stressed is just a big pile of manure. The consumer doesn’t change their behavior overnight; they don’t get sick and then recover within a single quarter. As we consider what the Fed will discuss on Friday at Jackson Hole, with the averages inching up 56 points and the S&P 500 advancing 42%, we need to rethink the great debate about the state of the consumer.”
Jim Cramer points out that understanding consumer behavior is crucial for predicting when the Fed might cut interest rates. He explains that the Fed needs to lower rates before the economy worsens to the point of needing urgent intervention. However, the Fed can’t act if the economy is performing well.
“This debate is central to what the market needs to see for rate cuts. We first need to understand that the Fed has to start cutting interest rates before the economy deteriorates to a point where they need to scramble to fix things. However, they can’t act if the economy is doing fine. The aggregate retail sales data is inconclusive, so we often try to extrapolate from individual retailers. Taken together, these retailers seem to suggest that the consumer is fickle and perhaps tapped out.”
Jim Cramer argues that the current debate about consumer behavior might be misguided. He believes that consumers are not as fickle as some suggest. Instead, they are shopping at stores led by successful retail CEOs like Ron Vachris, Doug McMillon, Ernie Herman, and Brian Cornell.
“Tonight, I’m arguing that the consumer is not fickle at all. People are shopping, and they’re shopping at places where great retail CEOs are making a difference, like Ron Vachris at Costco, Doug McMillon at Walmart, Ernie Herman at TJX, and Brian Cornell at Target. These are the places people are choosing to shop. The consumer isn’t frugal or tight-fisted; they’re simply shopping where they prefer, and these outstanding merchants are drawing them in.”
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Close-up of a technician’s hands adjusting a communication router.
Lumen Technologies Inc. (NYSE:LUMN)
Number of Hedge Fund Investors: 18
Jim Cramer noted that the move in Lumen Technologies Inc. (NYSE:LUMN) has been dramatic and steep. He mentioned that investing in network security and cloud solutions would have been ideal. While some saw this opportunity, he missed it and considered the trade to be over.
“This is a parabolic move. It would have been great to be invested in something like network security and cloud solutions. For some, it was easy to see, but I missed it. The trade is done.”
Lumen Technologies Inc. (NYSE:LUMN) is well-positioned for significant growth due to its strategic partnerships with major companies like Microsoft Corporation (NASDAQ:MSFT) and Corning Incorporated (NYSE:GLW). By supplying network infrastructure and fiber optic cables to support Microsoft’s Azure Cloud expansion, Lumen Technologies Inc. (NYSE:LUMN) taps into the increasing demand for AI-driven technology. Additionally, the deal with Corning gives Lumen Technologies Inc. (NYSE:LUMN) access to a large share of global fiber capacity, enhancing its supply chain in a competitive market. These developments have recently led to a 7% increase in Lumen Technologies Inc. (NYSE:LUMN)’s stock, indicating renewed investor confidence.
Although Lumen Technologies Inc. (NYSE:LUMN) still faces financial challenges and high debt levels, the positive market response suggests that the successful execution of these partnerships could lead to a meaningful turnaround. If Lumen Technologies Inc. (NYSE:LUMN) manages to capitalize on these opportunities, it could see substantial revenue and profit growth, making Lumen an appealing investment despite its risks.
Longleaf Partners Fund stated the following regarding Lumen Technologies, Inc. (NYSE:LUMN) in its fourth quarter 2023 investor letter:
“Lumen Technologies, Inc. (NYSE:LUMN) – Global fiber company Lumen was the top detractor for the year, and we sold our position in the first half, when it became clearer the new management team under CEO Kate Johnson would not pursue a strategic path to monetizing Lumen’s consumer business. Lumen represented a permanent capital loss for the Fund, a significant opportunity cost for the portfolio and a disappointing long-term mistake. Lumen has reinforced the importance of limiting overweight positions in the portfolio, being cautious of leverage and value declines, and fully re-underwriting a case – and being willing to move on – when the people and/or underlying facts change.”
Overall LUMN ranks 10th on our list of stocks Jim Cramer is talking about. While we acknowledge the potential of LUMN as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LUMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.