Opinions
Lorne Steinberg
Vodafone Group PLC
VOD-Q
COMMENT
Jan 30, 2018
Stock price when the opinion was issued
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A hard one to look at. You will see red if you have held it for a while. This is due to their spinout. Your book price is higher due to the fact it does not take into account of the dividend from the spinout. Tends to build up companies and then spins them out. There is growth however. Brexit was the biggest impediment for them. UK based companies now should do pretty well. Good for income.
Premium contentThe recently announced proposed merger with another network provider has great upside potential and is called a "game changer" for bringing more competition to the UK mobile market, while allowing economies of scale for a 5G rollout. The company trades at 9x earnings, under book value, is growing cash reserves, and supports a 20% ROE. We recommend placing a stop-loss at $8, looking to achieve $13 -- upside potential of 33%. Yield 0.9%
(Analysts’ price target is $13.38)Premium contentWe reiterate VOD, who is teaming up with Amazon to provide satellite based service into Africa and Europe, as a TOP PICK. The project is set to begin in 2024 and avoids land-based fibre optic investment. It trades at 13x earnings and under book value, while supporting a 20% ROE and growing cash reserves. We continue to recommend a stop at $8, looking to achieve $12 -- upside over 25%. Yield 0.9%
(Analysts’ price target is $13.72)Premium contentPremium contentOur PAST TOP PICK with VOD has triggered its stop at $9. To remain disciplined, we recommend covering the position at this time. When combined with previous buy recommendations, this will result in a net investment loss of 4%.
Not a huge fan of telecom companies globally. However, their dividends are sustainable, so he wouldn't be worried about a dividend cut in the future. However, this has been a zero-growth company, and will probably remain so. They are into cost cutting that will fuel marginal earnings growth, but it is not attractive to him. Rising interest rates will mean these kinds of companies will be negatively affected.