Vodafone share price drops after earnings, as technicals point to a 22% surge

Vodafone share price dropped today, May 12, even as the company published strong financial results, helped by its strategic pivot to its main markets. It dropped to 112p, from the year-to-date high of 121.95p. Still, it remains substantially higher than last year’s low of 63.12p.

Vodafone’s strategic pivot is paying off 

Vodafone, one of the biggest telecom companies in the world, has been in a major strategic shift in the past few years, and the financial results published today show that it is working.

The company has exited some major markets like Italy, Hungary, Spain, and Ghana. At the same time, it has continued to reduce its stake in Vantage Towers, a leading telecommunications service provider.

At the same time, it has continued to invest in its core markets. For example, it acquired Three in the UK to create a bigger competitor to BT Group. Most recently, it boosted its stake in Safaricom, the largest telecom company in East and Central Africa.

There are signs that these efforts are starting to pay off as evidenced by the financial results published today. These numbers revealed that its revenue rose to over €40.5 billion in the last financial year from the previous €37.4 billion.

The service segment continued growing, reaching €33.5 billion from the previous €30.8 billion, while the adjusted free cash flow rose to €2.6 billion.

A look at its segments shows that Germany’s business continued its recovery, with its organic service revenue rising by 1.3% in the fourth quarter.  This revenue was mostly because of the higher wholesale volume and offset by the intense competition and the final TV law.

Its business in the UK improved by about 0.3%, helped by the ongoing growth in its consumer business, which was offset by the decline in its business arm. 

Most of its growth is coming from its African business, which experienced a double-digit growth trajectory, and Turkey. In a statement, Margherita Della Valle, the CEO, said:

“We returned to top-line growth in Germany, alongside strong performances across Africa and in Türkiye. Our early successes from the UK merger integration reinforce our confidence in its potential, and I am delighted that we are now gaining full ownership.”

Vodafone share price technical analysis

VOD stock chart | Source: TradingView

The weekly chart reveals that the VOD stock has rebounded after forming a double-bottom pattern at 63p. A closer look shows that the stock has been gradually forming a rounded bottom or a cup-and-handle pattern whose upper side is at 141,70. These patterns are usually highly bullish as they signal that bulls are gaining control.

The stock formed a golden cross pattern in February as the 50-week and 200-week moving averages crossed each other. This pattern normally leads to more gains as it signals that the short-term rally is gaining momentum.

Therefore, the stock will likely continue rising as bulls target the key resistance level at 141.70, its highest point in May 2021 and February 2022. This target is about 22% above the current level. However, a drop below the key support at 104p will invalidate the bullish outlook.