Is Vodafone Turning Around Or Is It Just A Pullback???
Vodafone Group PLC is a British international telecommunications company. Vodafone operates networks in 26 countries and has partner networks in over 50 other countries and ranks fifth by revenue among mobile operator groups globally.
A year ago, Vodafone was down in the dumps and amassed several challenges:
Vodafone's acquisition of Liberty Global PLC Class A (NASDAQ: LBTYA)'s German/central Eastern European added so much debt, even a cut to its dividend cut would not free up resources to invest in organic growth.
In Spain, Vodafone was being squeezed by MasMovil's single/dual-play pricing.
Vodafone needed to start making investments in 5G, but couldn’t service their debt.
In essence, Vodafone was cash strapped, but needed to keep up with the competition’s deployment of 5G. So earlier this year, due to spectrum cost and falling revenue, out of desperation, they slashed its full-year dividend by 40%. It was the first cut since the company introduced dividend payments in 1990.
But it appears things are starting to turn around. In August, Vodafone announced their first quarter earnings which were pretty good. The company saw organic growth in key markets like Turkey, Egypt, and Germany. The company also announced reaching a deal to share 5G equipment with Telecom Italia, creating a jointly owned tower company into a new company that they are spinning off. The spin-off will help Vodafone clean up its balance sheet.
Vodafone announced their second quarter earnings this week. The company saw sales growth for the first time in two quarters and forecasted better year end guidance.
Read needs some decent sales growth to generate cash for network investments and service debts built up with Vodafone’s purchase of Liberty Global Plc assets. South Africa, Italy and Spain all improved as Vodafone faced tough competition from former phone monopolies and no-frills challengers. The company said it had the best ever quarter for new customers in the U.K.Read said he expects to build upon the revenue growth in the second half of the year in both Europe and Africa.The company toned down its guidance on full-year free cashflow, while boosting its forecast for earnings after the Liberty Global deal.
So where is the stock price headed, after reversing from lows not seen since 2008.
The chart suggests to go long on a pull back to the daily demand at $18, with a final target at the daily supply at $29.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Interesting opportunity as they still have some good assets they could sell as well if they need to raise cash.
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