Technology Stocks

Windstream Holdings Inc (NASDAQ:WIN) Monetizes Earthlink In A Bid To Strengthen Balance Sheet

In late 2016, it emerged that Windstream Holdings Inc (NASDAQ:WIN) would merge with EarthLink Holdings Corp. Notably, Windstream retained the majority status as well as its brand name. Fast forward, Windstream is unloading Earthlink consumer internet business. In a deal valued at $330 million, Earthlink will now wholly belong to Trive Capital which is a private equity firm.

Windstream in asset unloading drive

After the acquisition deal with EarthLink in 2017, Windstream went ahead and acquired another business, Broadview Networks. Unlike the EarthLink transaction which amounted to $1.1 billion, Windstream spent only $227.5 million in the Broadview deal. Nevertheless, the rate at which the firm acquired businesses intrigued investors and Wall Street alike.

It is therefore quite surprising that Windstream would sell the businesses almost one week apart. Just before finalizing the deal with Trive Capital, Windstream unloaded a few other assets. Notably, the firm seems to be in an asset disposal campaign which perhaps aims to strengthen its balance sheet. Notably, Windstream just recently sold a certain quantity of fiber assets in Nebraska and Minnesota. Notably, Arvig Enterprises acquired the assets at the cost of $60.5 million.

Interestingly, the asset unloading comes at a period when the firm’s stock is nosediving dangerously. Notably, the stock lost over three-quarters of its value between late November and late December. In the same period, the stock breached the 50-day moving average support for the second time in just a month.

The stock is picking up

In particular, the share price began to sink mid-November seriously. Since then, the stock remained in an extended bear market. Interestingly, the stock only started showing signs of a rebound once it began unloading assets a few weeks ago. With the RSI edging towards the 42.82 point zone, it is clear that the stock might pick up some value.

The 50-day moving average underlines the strength the stock is gaining by gaining a few points. This brings the new MA (50) to 3.42 while the MA (200) remains pegged at 5.19. Further, the volume of the stock transacted in the last few days lends credence to the rebounding trend of the stock. Notably, the previous 24-hour trading period saw over 639.9K shares of Windstream stock change hands. Essentially, it is clear that the stock might continue to pick up some gains in the coming quarters.


Surprise EPS

The drive towards unloading of some assets could be strategic to help the firm cut down on the losses incurred in Q3 2018. According to the earnings report for that quarter, the firm posted $1.47 billion in revenue. This poorly compares to the $1.50 billion registered in the same quarter a year ago. As such, the company is working hard to close the gap and probably turn up a profit.

Nonetheless, the firm surprised analysts who had estimated earnings per share loss of $2.57 versus the expected $2.58. Interestingly, this is not the first time the firm is delivering such a surprise. According to analysts at Zacks Investment Research, Windstream surpassed consensus earnings per share in three of the four last quarters.

Good days ahead for the patient investors

Further, the analysts at Zacks observe that Windstream underperformed the market for most of 2018. However, they expect that the latest strategic sale of assets will change the narrative. Interestingly, the trend is already apparent in the last six trading days.

Notably, the last 24-hour trading period saw Windstream’s stock closed 145% above the all-time low price registered just days ago. As such, it is clear that there is renewed strength in the upwards trend of the stock. Therefore, investors that give the stock a little more time to pick up essential gains will earn good margins.

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