Vodafone share price: 3 things to watch out for ahead of its half-year results
Vodafone will unveil its half-year results next week, but while its share price has stabilised, with market competition high and its balance sheet incumbered by debt the stock is unlikely to see significant gains in the near-term.
Over the last 18 months, Vodafone has gone through extensive restructuring and acquired German and eastern European cable assets from Liberty Global – helping the company’s share price to stabilise after hitting 120p levels in May.
‘Vodafone shares have managed to break out of the 2018 and 2019 downtrend, which saw them go from 220p to 120p by the middle of 2019,’ chief market analyst at IG Chris Beauchamp said. ‘The shares have recovered but remain relatively cheap.’
‘If the firm can avoid further cuts to its payout and continue its European expansion, we may see the current uptrend move higher,’ he added.
Liberty Global deal strengthens Vodafone’s European presence
Vodafone’s €18.4 billion deal with Liberty Global will make the company a leading player in many European markets, particularly Germany, with it now boasting the necessary scale to compete with its rivals.
Vodafone is now the largest pay TV operator in Germany, and the biggest in Europe after Sky .
However, the Liberty Global deal has increased Vodafone’s debt pile to €50 billion, forcing the company to cut its dividend.
TowerCo spin-off could raise up to €20 billion
In a bid to strengthen its balance sheet, Vodafone plans to spin-off its pan-European mobile mast business in the next 12 months, with the stock market floatation worth as much as €20 billion.
The new entity, named TowerCo, will comprise of more than 61,000 Vodafone masts across 10 countries, including core European markets like Germany, Italy, Spain and the UK.
Vodafone estimates that TowerCo will generate revenue of €1.7 billion and EBITDA of €900 million.
‘Building on our position as Europe’s largest converged operator, we are now creating Europe’s largest tower company,’ Vodafone Group CEO Nick Read said.
‘Given the scale and quality of our infrastructure, we believe there is a substantial opportunity to unlock value for shareholders while capturing the significant industrial benefits of network sharing for the digital society.’
Analysts remain upbeat about Vodafone’s share price
Citigroup and Deutsche Bank are optimistic about the stock’s price trajectory, with analysts from both banks reiterating their ‘buy’ rating for the stock in November.
Deutsche Bank has issued a 240p price target for Vodafone, which implies a 47% potential upside based on the 163p level that the stock closed at on Thursday.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.