Windstream Stock Forecast

Windstream Stock Forecast: The U.S. telecommunications sector currently faces a number of risk factors, including rapidly evolving technologies and stiff competition for customers. Political and economic changes mean that telecom companies must quickly adapt to changing business landscapes and market demands.

With all that in mind, it’s no surprise that some telecom companies are struggling – a prime example is Windstream Holdings [OTCMKTS: WINMQ], which declared Chapter 11 bankruptcy in February.

Does Windstream stock have a chance at recovering from this setback, or should investors flee before shares sink even lower?

What Does Windstream Do?

Windstream Holdings [OTCMKTS: WINMQ] is a Fortune 500 telecommunications company that provides multiple voice and network services (including broadband Internet and VoIP) to business and residential customers. The company is particularly known for delivering services to customers in rural areas.

Headquartered in Little Rock, Arkansas, Windstream was founded in 2006 and is currently led by president and CEO Tony Thomas, who has served in that capacity since 2014.

The company’s top competitors include CenturyLink [NYSE: CTL], Comcast [NASDAQ: CMCSA], and RingCentral [NYSE: RNG].

What are the Risks of Buying Windstream?

The biggest concern for investors looking at Windstream is the Chapter 11 bankruptcy that it filed in February. Shares of Windstream stock plunged by 43 percent after the announcement, and have continued to decline thereafter.

Due to its sustained drop below $1.00, Windstream stock has been delisted from NASDAQ, where it held the ticker symbol WIN, and moved onto the OTC Markets platform, where it holds the symbol WINMQ.

Windstream’s decision to file for bankruptcy came after losing a legal battle against Aurelius Capital Management. According to federal judge Jesse Ferman, Windstream violated the terms of its agreement with bondholders, including Aurelius, when it spun off some of its network assets into the real estate investment trust Uniti Group.

Even before filing for bankruptcy, however, Windstream stock was on the decline, with revenue and cash flow lower and lower year after year. In the first half of 2018, for example, shares plummeted by 43 percent.

Then in March, Windstream Holdings [OTCMKTS: WINMQ] reported disappointing Q4 financial results of $549 million in losses, or a loss of $12.92 per share.

Part of the problem was Windstream’s inability to capitalize on the assets it gained from its 2017 $1.1 billion, all-stock merger with EarthLink. In January 2019, Windstream sold off its legacy EarthLink consumer Internet assets for $330 million to a private equity firm.

Another issue is the fact that Windstream’s business model is becoming less and less viable. As a landline telephone provider, Windstream invested heavily into expanding into rural areas in order to acquire new customers. However, the use of landlines has dropped precipitously over the past several years as customers switch to mobile phones instead.

Is Windstream Stock A Buy?

Windstream’s decline has drawn interest from bargain-hunting investors who might be looking to scoop up the stock of a Fortune 500 company at a seriously low price. The question is, however: do shares of Windstream actually have a hope of recovery, or is the stock going to remain in freefall?

The good news is that all hope is not lost for Windstream. The company has secured $1 billion in debtor-in-possession financing from Citigroup in order to support its business operations moving forward. What it does with this emergency funding, however, is another question entirely.

Of course, Windstream Holdings [OTCMKTS: WINMQ] has other business lines to invest in besides landlines: namely, consumer Internet and digital television. Yet in the company’s Q3 results in November 2018, the number of users year over year shrank for these services as well.

Despite the Chapter 11 bankruptcy filing, Windstream stock has recently showed signs of life. In May, Windstream reported quarterly earnings of $0.65 per share, beating estimates of a $1.82 loss per share.

Windstream Stock Price Forecast

Windstream’s decision to file for Chapter 11 bankruptcy in February may be one of the final nails in the coffin for the company. The company’s sinking financial numbers (including debt of $5.8 billion, more than 100 times its market capitalization) mean that it’s tough to see a path forward.

According to CEO Thomas, Windstream Holdings [OTCMKTS: WINMQ] plans to use the bankruptcy as an opportunity to gather more capital and resources in order to generate “operational momentum.” In addition, the company will continue to deliver services to its customers and pay its creditors throughout the bankruptcy.

However, Windstream has shown little indication that it will be able to make its way out of the weeds. As consumer tastes change and technologies evolve, Windstream has not been able to adjust its business model and strategy in the highly competitive telecom market.

Larger companies like AT&T, Comcast, and Verizon have money to burn – including money to invest in the upcoming rollout of 5G wireless technology – while smaller competitors like Windstream risk getting locked in an inescapable death spiral.

Due to the dire financial straits of Windstream at this time, investors would be wise to stay cautious about buying Windstream stock – no matter how much of a good deal it may seem. Indeed it may be wise to re-evaluate any existing holdings of Windstream (and its REIT Uniti) to see whether capturing existing value is worth it.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.