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by Joseph Lazzaro

The shares of rural broadband and telecom provider Windstream Corp. (WIN), first discussed here on January 18, 2010 at a price of $10.92, are not for those who seek capital gains that appear overnight. But if you’re patient with Windstream, you will be rewarded. Here’s why:

Windstream, with a presence in 16 states, will likely post at 4-6% revenue gain in 2010 as broadband subscriber increases offset a phone revenue decline. Windstream should also benefit from a rise in business broadband subscriptions as business formation increases with the U.S. economic recovery. A neat $1 annual dividend adds to the positive story.
The Thomson Reuters First Call FY2010/FY2011 EPS estimates for WIN are 76 cents to 86 cents.

Technically, as noted, Winstream’s shares have registered incremental progress in the past six months, but the stock has consistently remained above the key, 50-day moving average — a bullish sign.

2011 Outlook: I view Windstream as a long-term play, but if you’re looking to sell WIN within the year, it’s probably best to take your profits after it rises to $15-16, if it fails to rise above $17.

Stock Analysis: I consider Windstream Corp to be a moderate-risk stock. If an investor has already purchased the company’s shares, I’d hold them. If not, I’d 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, I wouldn’t buy more than 50% of my WIN position before January 2011 and I’d put a sell/stop loss at: $8.

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