Vodafone Group PLC: This Report Is Sending VOD Stock Plunging

Vodafone stockVodafone Stock Falls to 52-Week Low

Vodafone Group PLC (ADR) (NASDAQ:VOD) stock is down about 1.82% at $25.42 after the British mobile phone group reported its half-year results, six months to September 2016.  

Vodafone reported a better-than-expected 4.3% rise in organic earnings before interest, tax, depreciation, and amortization (EBITDA) growth, supported by strong cost control. The organic service revenue growth was 2.4% in the second quarter, which was ahead of consensus, driven by growth in Germany and Italy. Group revenue over the six months to the end of September fell 3.9% to about $28.0 billion. (Source: “Vodafone announces results for the six months ended 30 September 2016,” Vodafone Group PLC (ADR), November 15, 2016.)    

However, the big negative was that the company loss was deepened by the huge write-down of the value of its India business by $5.4 billion, due to increased competition. A price war has begun in India, where a new entrant is offering free services as of now.

VOD stock has lost about 17% year-to-date, as compared to the eight percent gains posted by the S&P 500.

Vodafone is the second-biggest mobile carrier in the world and also operates in emerging markets like India, Egypt, and Turkey. In the emerging markets, data adoption is rapid and the 3G/4G mobile data customer base is 112 million, up 56% year-on-year. The company is becoming an integrated operator for both households and businesses in its main markets.

Vodafone stock currently has a “buy” rating from the majority of analysts. VOD stock has been losing ground this year, and is near its 52-week low of $25.42.

The total European on-net customer base has reached 5.9 million, representing on-net penetration of just 19%, which means significant opportunity for future profitable growth. In TV, the customer base has grown by 0.2 million in the first half of the financial year to 9.8 million customers. 28% of the company’s broadband customer base is now on converged offers. The churn rates for converged customers are typically half that of customers who purchase a single product. Vodafone stock (VOD) may look up again as the growth in Europe gathers momentum.

The company has narrowed its full-year guidance and expects organic EBITDA growth of three to six percent.   

Citigroup Inc (NYSE:C) analyst Simon Weeden said the cut at the top end was “somewhat pernickety,” but he expected the market to be relieved that competition in India was not more damaging at this stage. (Source: “Vodafone takes $5 billion charge against new price war in India,” Reuters, November 15, 2016).

Vodafone stock has lost almost 18% in the last year, whereas the S&P 500 gained nine percent in the same period. The company has been facing mobile phone billing problems in Europe for a while. This, together with its emerging market uncertainties, may keep VOD stock under pressure.