Please ensure Javascript is enabled for purposes of website accessibility

Why Did Frontier Communications Corp. Shares Gain 21% in January?

By Daniel B. Kline - Feb 6, 2018 at 2:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company did not report or offer any hint that its subscriber loss has turned around.

When a stock has been beleaguered as long as Frontier Communications (FTR) shares have been, sometimes even mild good news can send prices higher. That's what happened in January when the broadband and cable company released a lot of minor news that seemed to give investors hope.

What happened 

Frontier shares have been steadily moving downward based on the company's results. It has lost customers in every quarter since it purchased Verizon's wireline business in California, Texas, and Florida for $10.5 billion in April 2016. That deal did offer promised cost savings -- over $1 billion already -- but the company did not anticipate that it would not be able to hold onto many of the approximately 3.3 million voice connections, 2.1 million broadband connections, and 1.2 million FiOS video subscribers it paid for.

That mistake forced the company to cut its dividend and reverse split its shares in order to maintain its stock listing. Investors have correctly not been overly happy with Frontier, and generally, at least until January, its share price was heading steadily down.

A man takes a scissors to a cable cord

Cord-cutting has caused Frontier to lose customers. Image source: Getty Images.

So what

Nothing major changed for Frontier in January, but the company did release some positive news. Early in the month, it had expanded its higher-speed service offering to 275,000 homes in California in accordance with federal Connect America Fund requirements. 

The company also launched Total360 Business Continuity & Disaster Recovery Service on Jan 22. That product "converts data directly from servers into virtual machine-readable files that can be recovered from a web interface, hypervisor or virtual machine monitor," allowing for "instant on-site or off-site recovery." That helps minimize organizational downtime in the event of a digital or physical disruption or disaster.

In addition, on Jan. 25, the company amended its principal credit agreements. The new deal changes some of the parameters for the company's debt and should give it increased runway.

"We believe these amendments will provide operating flexibility, better position us to address our upcoming note maturities and optimize our access to the debt markets," CFO Perley McBride explained in a press release.

All of this news together gave investors more hope for the company's long-term survival. That caused shares, which closed December at $6.76, to finish out January at $8.19, a 21% gain, according to data provided by S&P Global Market Intelligence.

Now what

Optimism over mildly good news evaporates quickly when a company reports bad news. These gains won't last if Frontier shows more subscriber losses when it reports on Feb. 27 after market close. Since that's almost certain to happen, these gains are likely to be short-lived.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Frontier Communications Corporation Stock Quote
Frontier Communications Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.