Vodafone shares price could explode higher: July 25 will be key

on Jul 10, 2024

Vodafone (LON: VOD) share price has moved sideways in the past few days as investors wait for the company’s trading update scheduled for July 25th. It was trading at 71p on Tuesday, where it has been in the past few days. This price is about 18% above the lowest point this year.

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Substantial challenges remain

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Vodafone, a leading telecom company, is going through a turnaround as the management seeks to reboot its performance. 

This turnaround comes at a time when the stock has come under intense pressure in the past few years as the industry slowdown continued. 

Earlier this year, its stock plunged to a low of 59.75p, its lowest level since November 2010. At that point, it was down by more almost 60% from its all-time high of 149.8p.

Vodafone’s performance is not unique as most telecom companies have come under pressure in the past few years. In the UK, BT Group’s stock has plunged by 60% from its highest level in 2016 and 75% from its all-time high.

Similarly, in the US, AT&T stock is down by 20% from its all-time high while Altice has dropped from a record high of $38 to less than $2. 

This performance happened as these telecom companies reached a stage of maturity, which led to slow growth. Investors then moved to other fast-growing assets like technology companies like Microsoft and Alphabet. 

At the same time, they have been forced to invest heavily in upgrading their network. Vodafone has spent billions of dollars upgrading its 5G network in its key markets like Germany and the United Kingdom. 

It has also spent substantially rolling out its fibre network. At the same time, it is contending with increased competition, with the likes of SpaceX seeking to gain market share in the industry. 

All these factors have led the company to accumulate over $50 billion in debt, making it one of the most leveraged companies in the FTSE 100 industry.

Vodafone turnaround is underway

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Amidst all these challenges, the management has embarked on an ambitious plan to turn around the company. 

It has exited some key markets. Earlier this year, the company sold its Spanish business to Zegona Communication for over €4.1 billion in cash and stock. It also sold its Italian business to Swisscom in a €8 billion deal. I believe that Vodafone has more room to reduce its global footprint, a move that will lead to a leaner organization.

Thse sales have helped the company to reduce its debt and reward its shareholders. It has done that by increasing its dividend to 4.5c per share from 2025 and €4 billion capital return. Remember, Vodafone is one of the top dividend payers, thanks to its 10.7% dividend yield

At the same time, Vodafone is aiming to boost its market share in the UK, where it is working to complete its acqusition of Three

In addition to its high yield, the company is also relatively undervalued, thanks to its 18 PE ratio. This makes it a potentially cheap stock to buy.

Vodafone share price analysis

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Vodafone share price

VOD chart by TradingView

Turning to the daily chart, we see that the Vodafone stock price bottomed at 59.75p earlier this year and has rebounded by almost 20% to the current 71p. The stock is now hovering at the 23.6% Fibonacci Retracement point.

It has also formed a golden cross pattern as the 200-day and 50-day moving averages have made a bullish crossover. Also, it has formed a falling wedge pattern, which is a popular bullish pattern. 

Therefore, the stock will likely have a bullish breakout as buyers target the 50% retracement point at 86p, which is 21% above the current level.

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