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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.

Looking to trade Vodafone and other telecoms stocks? Open a live or demo account with IG.

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.

You can go long or short Vodafone with IG using derivatives like CFDs and spread bets.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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