Vodafone interim earnings: is a bottom for the share price now in?

When is Vodafone’s results date?

Vodafone publishes first-half (H1) earnings on 12 November.

Vodafone earnings – what does the City expect?

Vodafone continues its efforts to bring the Liberty Global assets acquired earlier in the year. On the one hand, its Liberty deal makes Vodafone a player in many European markets, especially the most important one, Germany. Having been present in these markets before, the Liberty deal now gives it the scale needed to compete properly with its peers. Vodafone is now the largest pay TV operator in Germany, and the biggest in Europe after Sky itself.

As a result, earnings are expected to rebound in the coming years, after years of weakness.

However, the firm is now burdened with a debt pile of over €50 billion as a result of the deal, causing concern for many investors. Even Vodafone cannot take on excessive amounts of debt, and the group has already cut its dividend to reduce cash outflow. The dividend was one of the strongest elements of the Vodafone investment case, but as a result of the cut earlier in the year this has been diminished.

Q1 saw a drop in service revenue, as well as weakness in Spain and South Africa. This is expected to moderate in Q2. Longer-term improvement in key areas such as the UK and Germany will be limited by stiff competition.

Earlier this year, Vodafone traded at 13.6 times forward earnings, its lowest in over five years. While the shares have become more expensive since then, at 20 times earnings, the valuation remains firmly below the five-year average of 28.

How to trade Vodafone’s earnings

Vodafone currently has a median target price of 187p, versus a current price of 160p. Of 26 analysts covering the stock, 18 have a ‘buy’ recommendation, while six have ‘holds’ and only two have ‘sell’ recommendations.

Volatility in Vodafone’s shares has been declining since August, with the 14-day average true range (ATR) just 2.7p, compared to 3.5p at the end of July. Narrower stop losses may be used so long as the 14-day ATR remains low.

Vodafone share price: technical analysis

Vodafone shares have managed to break out of the 2018 and 2019 downtrend, which saw them go from 220p to 120p by the middle of 2019. The price has now rallied above the 200-day simple moving average (SMA), and in September it hit 163p, its highest level since December 2018. Dips have proven to be buying opportunities, and with the daily moving average convergence/divergence (MACD) now poised to follow daily stochastics and provide a buying opportunity, we may see a fresh push higher, above 163p and on to new highs for the year.

Optimism reigns for Vodafone

After the uncertainty of 2018 and 2019, Vodafone seems to have found its footing. The shares have recovered, but remain relatively cheap, and the market has put the dividend cut behind it. If the firm can avoid further cuts to its payout and continue its European expansion, we may see the current uptrend move higher.