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

When a stock has been beleaguered as long as Frontier Communications (NASDAQ: 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.

More From The Motley Fool

• 3 Growth Stocks at Deep-Value Prices

• 5 Expected Social Security Changes in 2018

• 6 Years Later, 6 Charts That Show How Far Apple, Inc. Has Come Since Steve Jobs' Passing

• 10 Best Stocks to Buy Today

• The $16,122 Social Security Bonus You Cannot Afford to Miss

• Bitcoin's Biggest Competitor Isn't Ethereum -- It's This

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.