Windstream Shares Battered… Again, On UBS Downgrade To Sell

Just when you thought all of the bad news was already baked into the share price, another analyst lightning bolt sends shares tumbling down even further.On July 13, UBS analyst Batya Levi dropped Windstream Holdings (NASDAQ: WIN) from Neutral to Sell, and slashed the target price from $11.50 to $5.00 per share.Levi believes that Windstream will have to choose between cutting capital spending needed to generate crucial revenue growth, and cutting its coveted dividend distribution to shareholders.This dilemma puts shareholders squarely between a rock and a hard place, as either move will be viewed negatively by Mr. Market.Notably, this downgrade comes two months after WIN shares had begun their freefall triggered by its Communication Sales and Leasing (NYSE: CSAL) REIT spin, and 1:6 reverse WIN share split.• http://www.benzinga.com/analyst-ratings/analyst-color/15/05/5494009/windstream-how-low-will-it-go Tale Of The Tape - WIN Shares Halved YTDDuring the past 52-weeks, Windstream has traded in a range from $5.46 - $18.76. Windstream shares were off another 6 percent during mid-day trading July 13, from the Friday close of $5.68 per share; and WIN shares have already traded at a new $5.15 intraday low, as of this writing. UBS - Windstream: Downgrade Neutral To Sell RationaleLevi expects Windstream EBITDA "…to fall 10.4% annually to $487M, equating to 34.2% margins, down 280 bps Y/Y."Notably, UBS believes that proceeds from the sale of its remaining 19.9 percent CSAL REIT stake will be required to fund the existing dividend.UBS is forecasting a 3.4 percent drop in revenues for FY 2015, noting that the rate of decrease is slowing from a 3.2 percent sequential drop 1Q15/4Q14. This "stabilization" is mainly due to Consumer/SME segments, with Enterprise/Wholesale unfortunately continuing to weak according to Levi.UBS - Business Segment Is KeyPerhaps the worst news is that UBS expects, "Business revenues (representing 64% of the mix) to fall 2.5% annually, similar to the 2.6% fall seen in 1Q."That said, Levi also believes that Windstream management remains committed to turn Business revenues into a growth opportunity; however, feels that price competition will be the path to gain market share.Additionally, "Wholesale revenue decline should continue to decline at ~13% driven by lower switched access revenues, which will partly be captured in higher residential and business SLC rates," according to Levi.UBS - Bottom LineLevi expects Windstream CAGR to be a negative 2.4 percent from 2014 to 2017, with EBITDA also expected to be minus 4.7 percent CAGR during the same time period.The new UBS $5 PT "…reflects 4.1x 2016E EBITDA and dividend yield of 12.0%."Notably, WIN shares are currently yielding ~7.75 percent, which implies that either the distribution would have to increase, or the price would have to continue to fall.