This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
On the eve of today’s first half results, Vodafone shares were down a whopping 39.7% from January’s 2.5yr highs, trading 9-year lows. The driver was a combination of concerns about slowing organic growth/competition, overspending to reignite growth (e.g. 5G, International) and the risk of the dividend being slashed/re-based to preserve cash and help deleverage a big debt pile.
A big first half loss certainly doesn’t make for great reading, but it can be explained by an exceptional loss related to its disposal of Vodafone India. And this was easily countered by a good news on several fronts;
So gains of 8.5% today (adding 14pts to the FTSE100) are understandable, traders breathing a collective sigh of relief. It may even mark the early days of a bullish turnaround, having escaped from a 3-month falling channel. Work to do, for sure, but it’s the best results-based news to have benefited the share price this year. The only other big positive moves this year were linked to its acquisition of UK 5G spectrum in April (+3.3%) and activist investor Elliott Advisors taking a stake end-July (+3.6%).
With the dividend safe for now, and the outlook for costs and cash generation looking more rosy, might the shares see renewed interest as both an income and capital growth play, helping them retrace some of 2018’s annus horribilis?
Mike van Dulken, Head of Research, 13 Nov 2018
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.Prepared by Michael van Dulken, Head of Research