Vodafone Is A Great Long Term Short
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.
In early October, a Wall Street analyst downgraded Vodafone due to the following challenges:
Vodafone's acquisition of Liberty Global PLC Class A (NASDAQ: LBTYA)'s German/central Eastern European assets will increase its leverage to an extent that even a large dividend cut will not free up resources to invest more into projects that could enhance earnings growth organically.
In Spain, Vodafone is squeezed between MasMovil's challenger single/dual-play pricing and TEF's success in lifting subs into triple-play, the analyst said.
Dellis sees the company making a potential cash outlay of 5 billion euros in calendar 2019-2021 if it spends 40 euros/MHz/POP at the upcoming 700MHz 5G auctions, including Italy.
In essence, Vodafone is cash strapped and won’t be able to service its debt. In addition, if it once to keep up with the competition in the future, it will have to find cash for 5G capital investments. Vodafone shares are near a three year low. However, I think it’s going lower, lets go to the charts to find out how long it can go.
Monthly Chart (Curve Time Frame) - monthly supply is $29 and monthly demand is $9.50.
Weekly Chart (Trend Time Frame) – the trend is clearly down.
Daily Chart (Entry Time Frame) – the chart suggests to short price on the pull back either demand zone,
with a first target at $14.50 and a final target at $9.50.
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.
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by rollandthomas
Wow! I would have expected this from a name like this! To add to your thoughts, I recall this being a high dividend payer as well so that may be at risk also. Does not look good although some assets are probably valuable and they could sell them off to meet debt obligations. Maybe hedge the short with some convertible bonds if they exist?
That's a great point, most telecoms are stable and offer a dividend. I'm not sure Vodafone's situation. Yes, they will have to sell off assets to meet there debt obligations...a tough spot to be in.