The last five years have been quite rough for the Vodafone (LSE:VOD) share price. Despite being one of Britain’s leading telecommunication businesses, the stock’s down over 40%. And while new leadership was brought on board in April 2023, the stock’s continued its downward trajectory by another 30%.
It seems Margherita Della Valle has yet to impress investors with her turnaround strategy. This pessimistic attitude isn’t entirely surprising given that this isn’t the first time Vodafone has changed CEOs to try to fix the slowly leaking ship.
However, despite appearances, the company’s making some notable progress. And looking at analyst projections, it seems the lacklustre share price performance may have created a buying opportunity.
What the ‘experts’ think
Of the 20 analysts following this business, 14 currently have a Hold recommendation. This ‘wait and see’ attitude towards Vodafone is nothing new. However, in terms of share price projections, the average consensus for the next 12 months suggests Vodafone’s share price could reach just shy of 85p.
By comparison, the FTSE 100 stock’s currently trading closer to 64p, indicating a potential 30% gain for investors who buy shares today. That suggests the market’s overly punished Vodafone shares. And if accurate, a £5,000 investment today could grow to £6,500 by this time next year.
A value opportunity or trap?
Let’s start with the positives. The company’s quarterly results reported a welcome 5% increase in total revenue to €9.8bn. Operations in the UK have just been injected with some fresh life. You see, the company received the green light to merge with Three, adding over 10 million new customers to its roster. And the €8bn disposal of its Italian operations was completed with the proceeds being used to begin tackling the €56bn pile of debt.
Pairing these milestones with continued double-digit growth in its African markets and stable organic growth in Türkiye, Della Valle’s delivering results. However, based on the Vodafone share price, investors are still not satisfied, mainly because of what’s happening in Germany.
Germany is Vodafone’s biggest market. It’s responsible for over a third of its total revenue, along with around half of its underlying earnings. Yet customers keep steadily walking out of the door in favour of cheaper competitors. That’s a serious problem that Della Valle hasn’t managed to solve. At least not yet.
The bottom line
Vodafone’s restructuring is steadily helping improve the state of the balance sheet and reduce interest rate pressure on the bottom line. But there’s still a long way to go. Its non-German operations appear to be chugging along nicely, but these are still not significant enough to offset the damage of a shrinking customer base.
All things considered, keeping Vodafone on a watchlist seems the most prudent for now. If German performance finally starts heading back in the right direction, then the stock may be worth a closer look. So despite the positive outlook for the Vodafone share price, this isn’t a company I’m rushing out to buy right now.
