The Motley Fool

Will Vodafone’s share price ever go back up to 200p?

Vodafone (LSE: VOD) is among the best-known companies in the FTSE 100. However, it’s been a disappointing performer for some time. It’s over two years since its shares traded above 200p. Lately, they’ve been changing hands for not much more than a quid. Can Vodafone’s share price ever go back up to 200p?

Before addressing that question, let me tell you about a lesser-known name in the telecoms sector. The Gamma Communications (LSE: GAMA) share price has soared over the period Vodafone’s has slumped. Indeed, last month it made a new all-time high. Could Gamma continue to be a star performer?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Gamma share price vs Vodafone share price

Looking at the year-to-date performance, the Vodafone share price is 25% below its level at the start of the year. Meanwhile, Gamma’s shares have risen 18%. And that despite being currently over 10% off last month’s all-time high of 1,755p.

This could be a good dip-buying opportunity, providing Gamma’s shares revert to their previous upward trajectory. On this score, it’s worth noting that the 2020 performance is no flash in the pan.

Gamma has performed strongly every year since it floated at 187p a share in 2014. Today, its market capitalisation is £1.5bn, and it’s among the 10 biggest companies on London’s AIM market.

Huge growth opportunity

Gamma is a leading supplier of unified communications services. That means video calling, instant messaging, multi-party conferencing and a whole lot more. Its customers are in the SME, public sector and enterprise markets.

The UK is its biggest geographical market, but it’s rapidly expanding in Europe. This represents a huge growth opportunity. Particularly as the coronavirus pandemic has shown that many employees can work effectively from home with the right communications kit.

Gamma’s trading at a premium rating of 29-times forecast 2021 earnings. However, I’d buy the shares today in the belief that we’re looking at a business with strong multi-year growth prospects.

Why is the Vodafone share price so low?

It’s not hard to see why some shareholders who bought Vodafone at 200p+ a few years ago have dumped the stock. And why the company has failed to garner sufficient interest from new investors to arrest the share price decline.

Vodafone has struggled to grow its revenue and earnings in recent years. Shareholders have also suffered a brutal dividend cut, particularly hard on those who bought the stock for income.

In the rear-view mirror, Vodafone isn’t a pretty sight. However, looking ahead there’s a far more appealing picture.

Too cheap to ignore

City analysts are forecasting explosive earnings growth in the years ahead. For Vodafone’s current financial year (ending 31 March 2021), they expect earnings per share (EPS) to increase 25%. Furthermore, they forecast a similar rate of growth for both fiscal 2022 and 2023.

The price-to-earnings (P/E) ratios for the three years are 16.8, 13.3 and 10.7. The price-to-earnings growth (PEG) ratios are 0.7, 0.5 and 0.4. These are well to the value side of the PEG fair value marker of 1.

If Vodafone delivers on the earnings growth, and the market were to give it a PEG fair-value rating by year two, it would require the share price to rise to 200p. With the company also currently offering a dividend yield of 7.6%, I reckon the Vodafone share price is too cheap to ignore. I rate the stock a ‘buy’.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.