Vodafone Share Price Forecast December 2021 – Time to Buy VOD?

Shares of Telecomm company Vodafone (LSE: VOD) are in the green today, currently trading at 11.5p a the time of writing. Over the past year, VOD shares have performed horrendously. Since the middle of last November, they have fallen by more than 5% excluding dividends. The shares have underperformed the FTSE 100 by nearly 20% over the past 12 months.

Vodafone – Technical Analysis

Vodafone’s financial statement indicates that the current market cap is at £3.109 trillion with total assets worth £13.245 trillion. Revenue for 2020 was at £3909.22 billion with a profit margin of 0.26% compared to £3934.67 billion in 2019.

Oscillators for Vodafone such as Relative Strength Index (14)(48.13),  Stochastic %K (14, 3, 3)(58.91),  Commodity Channel Index (20)(−20.34),  Average Directional Index (14)(13.46) and Awesome Oscillator(−0.81) are neutral.  Moving averages such as Exponential Moving Average (10)(112.34), Simple Moving Average (10)(112.66),  Exponential Moving Average (20)(112.41) and Simple Moving Average (20)(112.19) are indicating a sell action.

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Recent Developments

Vodafone currently has over 625 million customers spread across 65 countries. The company has been adopting AWS managed services such as Elastic Kubernetes Service and serverless compute engine Fargate which have changed how the company operates. This has drastically reduced the time to deploy a new application or prepare for a major event such as an iPhone launch or Black Friday. As a result, the friction barrier between the company and its customers will be reduced by a large degree.

Vodafone shares dropped after the company released its financial results for the first half of 2022 back in November. The report indicated that operating profit declined by 22% eventhough overall group service revenue increased by 2.8%.  Cash generation through operating activities only increased by 7.4% in the period. The above numbers aren’t inspiring, as it indicated that Operating profit slipped due to higher capital spending costs and a lack of lucrative roaming fees.

Additionally, the company’s adjusting free cash flow for the period came around €23 million, down from €451 million in the prior-year period. Vodafone’s increased by 0.9% to reach €44.3 billion. The company’s management has indicated that cash flow will be weighted to the second half and is guiding adjusted free cash flow of €5.3bn for the current financial year.

One of the biggest challenges of the company is its debt file which will only be met if the company hits the management’s projection. It has been selling off assets to streamline the business to get the debt under control. Vodafone may struggle to make the investments required to tackle competition if it does not have a strong balance sheet.

Should You Buy VOD Shares?

Investors interested in Vodafone have to see some metrics that the company has produced recently. It has an attractive dividend yield of over 6% which is doesn’t make it a stock that is worth going short on. If value shares come into fashion and interest rates rise quickly, the shares can be good for holding. The company has had a tricky 2020-21 season because of the pandemic which has forced it to slash its dividend by two-fifths (40%) last year.

However, it still remains one of the highest FTSE 100’s best dividend yield company t 6.9%. As it has already been cut in 2020, the cash payout announced seems to be more sustainable. Thus Vodafone can be a good addition to your portfolio if you’re looking for long-term holding.

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