Showing posts with label Vodafone. Show all posts
Showing posts with label Vodafone. Show all posts

Sunday, August 9, 2020

Barron's says buy Vodafone, are they correct?

On August 6, 2020, Barron's magazine published an article on Vodafone (NASDAQ:VOD) stating that the shares have bottomed based on the following reasons:

  • The company has put together €1 billion cost cutting plan.
  • Potential upside from introduction of 5G.
  • Assets that they have marked for disposal could generate cash and dispose of under performing assets.
  • The demand for data is exploding due to the lock down caused by the COVID-19 pandemic.

The company saw lower churn rates partly because of the pandemic driven lock downs. The company is also reaffirming its guidance and estimates that it will generate €5 billion in free cash flow. Germany is Vodafone's largest and most important market. It accounts for 34% of the company's EBITDA. Given that Germany has the virus under control, that market has been resilient through this global crisis. 

Exhibit: Vodafone's Most Important Market is Germany

(Source: SeekingAlpha)

Looking at the charts, the shares have been range bound ever since it peaked at around $18.18 on June 8, 2020. Barron's may have a point. The stock may have indeed bottomed. The Bollinger Bands are tightening, which may indicate a sharp price move, but we do not know in which direction. If Barron's is right, that sharp move may be an uptrend. Ideally, I would be a buyer when the price is hugging or closer to the lower band. Currently the price is in the middle of the band. The Moving Average Convergence Divergence (MACD) is flashing a slight buy signal. 
 
Exhibit: MACD flashing a moderate buy signal
 (Source: Tradingview)

I have placed a new buy limit order for Vodafone on $15.31. There's very less probability that I will get it at that price, but if I do I will report back on its performance when I sell.    
(Disclosure: I own VOD)         


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