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This "Sleeper" Stock Could Be the Surprise Winner of 2026
Key Points
Since 2024, Lumen Technologies has gone from value trap to comeback king, thanks to the emergence of its AI data center catalyst.
Even after this big surge, shares could have more room to run.
Whether from the announcement of more AI data center deals or from other company-specific developments, much remains in play to keep Lumen shares on an upward trajectory.
As recently as two years ago, Lumen Technologies (NYSE: LUMN) was in the stock market junkyard, trading at around $1 per share. However, thanks to an unexpected tailwind, shares in the telecommunications industry stock have experienced an incredible price rebound.
In just 24 months, this artificial intelligence (AI) stock is up 660%. Yet while you may lament not getting in earlier on this long-shot comeback story, the good news is that the bull case for Lumen is still unfolding.
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Image source: Getty Images.
How Lumen hit bottom
In the early 2020s, Lumen Technologies, the product of several regional phone company mergers, was popular among value investors as a de-leveraging and turnaround story. Investors expected a big recovery as Lumen sold off legacy assets to pay down debt and monetize its fiber-optic network. At the time, Lumen's focus was on monetizing its fiber asset by growing its residential fiber broadband business.
Unfortunately, this pivot failed to pay off fast enough. It didn't help that Lumen continued to allocate billions to dividends and buybacks. Eventually, the company eliminated its dividend, but it was too little, too late. With revenue and cash flow declining, and its appeal as a turnaround, value, and high-yield dividend stock vanishing, shares plummeted to all-time lows.
Don't sleep on a continued recovery
Starting in 2024, the company began pivoting toward providing services to artificial intelligence (AI) data . So far, the company has entered nearly $13 billion in what it calls "private connectivity fabric" contracts with AI and tech companies, including Microsoft and Anthropic.
Lumen has also sold its residential fiber business to AT&T, reducing debt by nearly $5 billion. While analysts do not expect Lumen to report positive earnings this year or the next, Lumen continues to enter into new AI data center connectivity deals, such as a recently announced collaboration with Amazon's AWS unit. Other efforts, such as debt reduction and asset sales, could also move the needle. Lumen is quietly recovering, but don't sleep on the opportunity.
Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool has a disclosure policy.