Windstream Corporation (WIN), AT&T Inc. (T), Verizon Communications Inc. (VZ): A Stock to Watch in the Telecom Sector

Previously, wholesale revenue depended on equipping tower sites with fiber; but with the completion of the build out for its partners, Windstream saw little activity in the sector. The only way for wholesale revenues to increase is for Windstream to sell services to tenants. If this succeeds, and the wholesale sector picks up, then it could provide a meaningful boost to Windstream’s revenues.

Pessimism
There seems to be some doubt surrounding Windstream, and this is keeping its price down. However, the company operates a strong core business along with a sector that shows promise. The company has ample cash, and it appears that the short-term concern with its wholesale business is overshadowing the stability of its core business.

At the end of the second quarter, Windstream Corporation (NASDAQ:WIN) had a cash flow of between $860 million to $900 million.. Because of the cash cushion and the growing business and consumer broadband segments, there appears to be little downside. When the wholesale business begins to gain traction, I expect the stock will be much higher than it is today. And while we wait for this, the business and consumer broadband sectors will be growing. Windstream stands to gain on the growth of both its business and wholesale segments.

Bottom Line
Windstream’s core business is growing. The next year will be a significant one for the wholesale business, and the success in selling business services to multiple tenants will be the real test for Windstream’s strategy. Right now, the stock is trading at levels that assume that Windstream cannot grow its wholesale revenues. But this is not correct. The company is one of the promising stocks available; and in the long term, it will overcome its challenges.

The article A Stock to Watch in the Telecom Sector originally appeared on Fool.com and is written by Adetokunbo Abiola.

Adetokunbo Abiola has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.