The last five years haven’t been kind to Vodafone (LSE:VOD) shares. The telecommunications giant has seen its market-cap tumble by almost 40% on the back of weak key market performance, troublesome leverage, and strategic overreach.
Anyone who thought the 2020 Covid crash created an alluring buying opportunity has been deeply disappointed. In fact, a £1,000 investment in July 2020 is now only worth £608, even including dividends. However, with shares up over 15% since the start of 2025, could the tide finally be turning? And is now secretly the perfect time to consider adding Vodafone shares to an investment portfolio?
What’s happening?
In April 2023, Margherita Della Valle was brought aboard as the new CEO to try and fix the ever-growing list of problems. Investors were understandably sceptical of the announcement, largely because this isn’t the first time Vodafone has changed leadership with the promise of recovery.
Since her appointment, Vodafone shares haven’t seen a stellar surge like that of its peer BT Group, which also recently brought in a new turnaround CEO. However, that doesn’t mean progress wasn’t being made. And skip ahead to 2025, some encouraging results are starting to emerge.
Non-core international businesses have been sold off, addressing operational overstretching concerns. The proceeds have also been used to wipe out a significant chunk of its debts & equivalents, which now stand at €53.1bn versus €66.4bn two years ago.
These moves have also streamlined the company’s focus to Germany, Africa, and the UK. Britain, in particular, looks poised for renewed growth pending the upcoming merger with Three UK. And in Africa, the continued popularity and penetration of its M-PESA payment processing platform is driving double-digit growth.
What’s next?
Despite encouraging progress in the British and African markets, Germany remains a sticking point. This is Vodafone’s largest and most critical market. Yet a combination of regulatory changes, stiff competition, and reputational setbacks means that sales and market share are still shrinking.
However, management’s been making moves to address the problems and improve customer experience. And if its assessment is correct, Germany will return to growth in the short to medium term. But, given that Vodafone’s track record of keeping its performance promises is patchy at best, investors seem to be taking the attitude of ‘I’ll believe it when I see it’. At least, that’s what the overwhelming number of Hold recommendations from institutional investors seems to suggest.
All things considered, the scepticism from investors in Vodafone’s ability to deliver a turnaround suggests that shares have the potential to surge if performance in Germany suddenly bounces back. But that’s a big ‘if’. And with competitive threats only increasing, this feels like it’s going to be a long, multi-year recovery rather than a rapid rebound.
With that in mind, I think there may be far better investment opportunities to think about today.
