Windstream Is Undervalued

Posted Jan 18th 2010 4:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

Rural broadband/telecom provider Windstream Corp. (WIN) has broken through key resistance at $10 -- i.e., its now "a contender," and I'm recommending the company's shares.

Look for 16-state-presence Windstream to post a 3-5% revenue gain in 2010, as broadband subscriber increases offset a likely phone revenue decline. Windstream should also benefit from a rise in business broadband subscriptions as business formation increases with the U.S. economic recovery.

The First Call FY2009/FY2010 EPS estimates for WIN are 81 cents to 86 cents. That 86-cent FY2010 EPS estimate will likely prove to be low.

Technically, Windstream's stock chart is strong -- an uptrend. Further, as noted, Windstream also recently broke through psychological resistance at $10 -- a key threshold for many institutional investors (IIs). As a result, more IIs will start buying WIN's shares.

2010 Outlook: Windstream is a long-term play. Don't buy WIN if you're looking to close your position by the end of 2010, as the 1-year risk/return is not favorable.

Stock Analysis: Windstream Corp. is a moderate-risk stock. Consider buying a 25% position in WIN now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your WIN position before March 2010. Sell/stop loss if you were to buy shares in this company: $4.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX

Tags: broadband, ISP, rural, WIN, Windstream Corp.