3 Reasons To Sell Shares In Vodafone plc

Despite the excitement surrounding a possible sale of its Verizon Wireless stake, I think Vodafone plc (LON: VOD) is a ‘sell’.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Vodafone

Everybody loves bid rumours and speculation.

Indeed, there seems to be little better than a dollop of merger and acquisition talk to ramp up a share price to exceptionally high levels. Great if you hold the shares, frustrating if you were thinking of buying them before their rise.

Indeed, bid speculation has been a major reason for the significant share-price gains made by Vodafone (LSE: VOD) (NASDAQ: VOD.US) in recent months. The shares were as low as 160p in February, reached 200p in May and now trade around 179p.

Of course, recent news flow on the company has been dominated by Vodafone’s takeover of Kabel Deutschland for €7.7 billion.

According to some analysts, this bid increases the chances of a sale of Vodafone’s 45% stake in Verizon Wireless, which is a joint venture between the British telecoms behemoth and US peer Verizon Communications.

So, with the deal to purchase Kabel Deutschland not appearing to have dampened the Verizon speculation, many investors could be left thinking that, with a bid still possible, Vodafone shares may be worth a look.

However, I believe that Vodafone is a ‘sell’ for the following three reasons:

1) Profitability has been poor for a number of years; return on equity has failed to reach double digits in any of the last five years.

2) Verizon Wireless is the ‘crown jewel’ in Vodafone’s locker. The rest of the business is failing to make notable gains, particularly in India where tax issues continue to hold the company back.

3) The shares seem to be at least partly pricing in the sale of Vodafone’s stake in Verizon Wireless. Any disappointment on this front could lead to a substantial share-price fall.

I do not own shares in Vodafone, nor do I intend to buy them just in case there is a bid for the Verizon Wireless stake.

In fact, I can think of better places to invest my hard-earned cash and would recommend that if you too are looking for alternative opportunities in the FTSE 100, this exclusive wealth report reviews five particularly attractive possibilities.

All five blue chips offer a mix of robust prospects, illustrious histories and dependable dividends, and have just been declared by The Motley Fool as “5 Shares You Can Retire On“.

Simply click here for the report — it’s completely free!

> Peter does not own any share mentioned in this article. The Motley Fool has recommended shares in Vodafone.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

£10,000 invested in Vodafone shares 6 months ago is now worth…

At the end of 2024, UK regulators gave the green light to a £16.5bn merger with Three. But has the…

Read more »

Investing Articles

Here’s how someone could start investing at 30 and aim for a million by 55!

Can a 30-year-old start investing from scratch and aim for a million by 55? Christopher Ruane thinks so. Here he…

Read more »

Investing Articles

What on earth’s going on with Apple stock?

Andrew Mackie assesses the potential long-term impact on Apple’s stock should it move its manufacturing base outside of China.

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how much a 28-year-old investor could have on retirement by putting £80 a week into a SIPP

Starting younger can have advantages when building up a SIPP. Christopher Ruane runs a slide rule over what value £80…

Read more »

Investing Articles

3 ISA mistakes to avoid in a turbulent stock market

Christopher Ruane runs through a trio of potentially costly mistakes investors may make when managing their ISA as the stock…

Read more »

Investing Articles

With Tesla stock down 50% in tariff panic, is it time to consider buying?

Tesla stock’s been one of the biggest investment casualties of the market slump this year. Is this a buying opportunity?

Read more »

Investing Articles

£20k to invest? Here are 2 high-yield dividend shares to consider for an ISA!

Maxing out a Stocks and Shares ISA could deliver a huge four-figure income with well-chosen dividend shares, explains Royston Wild.

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m taking the Warren Buffett approach to stock market turbulence as I aim to build wealth

Warren Buffett's lived through many bad markets -- and profited handsomely along the way. Our writer's applying some Buffett wisdom…

Read more »