Will This Downgrade Hurt Windstream (WIN) Stock Today?

Story updated at 9:55 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Windstream (WIN) was downgraded to "neutral" from "buy" by DA Davidson Thursday.

Shares of Windstream gained 0.1% to $11.26 in morning trading.

The downgrade is a valuation call based on an $11.75 price target according to the analyst firm.

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Separately, TheStreet Ratings team rates WINDSTREAM HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WINDSTREAM HOLDINGS INC (WIN) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, WIN's share price has jumped by 38.51%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, WINDSTREAM HOLDINGS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • The gross profit margin for WINDSTREAM HOLDINGS INC is rather high; currently it is at 52.78%. Regardless of WIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.95% trails the industry average.
  • WIN, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • WINDSTREAM HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, WINDSTREAM HOLDINGS INC increased its bottom line by earning $0.39 versus $0.29 in the prior year. For the next year, the market is expecting a contraction of 47.4% in earnings ($0.21 versus $0.39).
  • You can view the full analysis from the report here: WIN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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