Analysis of the Vodafone share price

Although historical prices are not an indicator of Vodafone shares’ future levels, they are useful in determining a pattern in the share price. It is quite clear from the table below that the company had a good year in 2014 but because of the events mentioned under the next header, the shares have been losing their lustre.

The current market cap of Vodafone is 30.99 billion GBX and 18 analysts have offered a median price target of 176 GBX over the next 12 months. Because of multiple failed ventures, the Vodafone share price has been in a slump since 2014 as the company has amassed a tremendous amount of debt that is also limiting its further expansion.

Attacks at all fronts: Vodafone shares in a slump since late 2014

The telecom sector has been amongst the worst performers in the last five years because of optimistic bets not being paid off and the accumulation of enormous debts. The emergence of 4G and 5G shifted the focus from service providers to a new breed of companies such as Alphabet, Apple, Nvidia and Facebook as these companies could offer investors an enormous growth potential and that too on a diversified front unlike those traditional telecom companies.

The Vodafone share price began climbing in 2014, breaking all previous price levels since 2001; so, in 2015 the company began extending its reach to a global level as it seemed the right time for it, but this could have been one of the biggest reasons for the shortfall of its share price:

• In 2015, Vodafone failed to complete a $120 billion merger deal with Liberty Global, thus hurting investor sentiments and sending its stock price to its all-time low.
• Revenue has decreased over 3.2% each year in Germany, as Vodafone Group couldn’t compete with the local service provider Deutsche Telekom.
• It is often painful to see your favourite football team lose a match, but more painful if they lose at their home ground. Such was the case with Vodafone, as its share price continued to weaken in the United Kingdom due to ‘bad deal making’ over the years.
• With heavy competition from local service providers in India, the Vodafone share price took a dip in the Indian stock market where it is traded under the name of Vodafone Idea. The company lost more than £5.7 billion in just one quarter of 2019, which forced the company to stop its further ventures in the Asian markets.

A sliver of hope for the Vodafone share price

Every coin has two sides and one should look at both the sides before deciding whether to invest.

• Vodafone is still the largest mobile and fixed network operator along with being one of the fastest growing 5G network in Europe.
• It is the leader in mobile payments in Africa with a customer base of 42 million people.
• It has successfully launched a cloud-based television platform in 10 markets across Europe.

An intelligent investor invests in the future by looking at the present of a company. Do I think the positives outweigh the negatives for Vodafone’s share price? My answer to this question is under the next header.

The Vodafone share price is at its 52-week low

The current Vodafone share price offer a good entry, but with no further advancements in its business model, I would not be investing my capital in Vodafone. The company has a consistent dividend record in the past but there has been a major shift from the telecom industries to the other digital industries as to the likes of Facebook, Apple, and Alphabet. The reason for this is that these companies have more growth potential than traditional telecom companies like Vodafone.

The emergence of 5G was supposed to be a breakthrough for the telecom sector but this news was absorbed by the share price of Vodafone as if nothing new has happened in the market. In fact, the share price of other digital companies like Alphabet and Apple saw a rise in their share prices when their products were integrated with the 5G technology. The negatives about the Vodafone share price outweigh the positives, in my opinion. We are living in an era where a breakthrough technology becomes obsolete in just six months, therefore companies must cope with this rising trend to come up with efficient solutions to complex problems. If a technology company cannot do that, then it won’t survive in the next five years in my opinion.

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Vincent Abraham has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Another reason for this decline is the allegation against the company for spreading misleading information to its investors regarding the rising costs in the Mongolian copper project. If there is something that millennial investors panic about more than crypto and NFTs, it’s fake news and information.

Can you smell what Rio is cooking?

Rio Tinto is due to give an update on its operational costs in the second week of October, and a positive report will allow the share price to develop a support at the current levels – otherwise we could experience another 10 to 15% fall, like the drop with Glencore (one of its close competitors that was charged with the same ‘misleading’ allegations).

Caterpillar (a leading manufacturer of construction and mining equipment) has signed a Memorandum Of Understanding with Rio Tinto for developing zero-emissions autonomous haul trucks for mining operations in the Western Australia. This autonomous upgrade will increase the efficiency of the mining operations and reduce the carbon footprint of the operations, which will be beneficial for the environment.

Do Rio Tinto shares look attractive for the long term?

Recent dip in the share price could be a blessing in disguise, as I could get a good entry at these low prices. The long-term prospects of the company are tremendous as not only it is one of the world’s leading iron mining companies, but it also processes other minerals that are crucial for the infrastructural development. The latest talks between the CEO of Rio and the U.S. government on developing strategies to harness the critical minerals from the copper waste that is produced at the mining plant in Utah (state of US) are underway, and aimed at breaking the monopoly of China in this area.

The current market cap of £78 billion with a 53.84% debt to assets and the beta value of less than one – which shows that the volatility of the stock is less than that of the overall market – are indeed some attractive numbers to look at, considering it’s been operational since 1873. The company has also been consistent in providing dividends over the years to its investors.

As the world economies recover from the 2020 pandemic, the construction/infrastructure sector is predicted to see a tremendous growth. It would be interesting to monitor the fluctuations in Rio Tinto shares during the short-term events as mentioned above, keeping a long-term mindset.

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Vincent Abraham has no position in any of the companies mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.