What happened

In response to a research report from Citigroup that covered both tickers, shares of Windstream Holdings (NASDAQ:WINMQ) and Uniti Group (NASDAQ:UNIT) plunged on Wednesday morning. Windstream shares fell as much as 14.7%, while the stock of the regional telecom's former infrastructure management division took a 12.8% haircut at worst. As of 11:40 a.m. EDT, both stocks had recovered somewhat to a level roughly 13% below Tuesday's closing prices.

Young woman under an umbrella that has been stripped of its canopy, collecting rainwater in a cooking pot with a wistful eye on the ceiling.

Image source: Getty Images.

So what

Citi analyst Michael Rollins cut his ratings on both Uniti and Windstream from hold to sell. Uniti's price target held firm at $15 per share, but Rollins slashed Windstream's target price from $7.50 to $1.

Windstream is huddled in a "precarious operating position and faces rising financial risks," Rollins wrote. The asset-less telecom's rickety operating and financial performance has become a threat to Windstream's future as an operating business and also to the guaranteed lease payments the company is making to Uniti.

Now what

Windstream's financial troubles aren't exactly new, but it's still galvanizing to see a high-profile analyst shining a spotlight on the issue. Uniti knows what's up and is working hard to distance itself from the old Windstream mother ship. The current goal is to collect more than 50% of quarterly sales from clients not named Windstream, and Uniti's management has penciled in a mid-2019 deadline for this ambition.

But Windstream might force Uniti's hand into an even quicker separation by going out of business, a real possibility at this point that would turn the entire partnership upside down.

The penny-stock target price on Windstream makes perfect sense, and it's no surprise to see Uniti investors rattled by this report.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.