Vodafone (LON: VOD) share price has derailed as the management seeks to implement a turnaround for the troupled telecom giant. The stock plunged below 100p and moved to the key support level at 99p. It has fallen by ~4% from its highest level in February.
Is the 7.80% yield at risk?
Vodafone stock price has had an eventful year so far as the management attempts to turnaround the company. It recently received an important news after John Malone’s Liberty Global, took a 5% stake in the company.
Liberty is one of the best operators of companies around the world. For example, it has been credited for implementing a turnaround at Formula 1 Group. Today, Formula 1 is one of the best players in the sports industry. It is unclear whether Liberty will take an active or passive role in the company.
Another major Vodafone news is that the company is exploring options for its African operations. The firm has a 55% stake in Vodacom, a company that serves over 55 million customers in several African countries. Etisalat is seen as a viable buyer.
Having a stake in African companies seems like a major risk for most companies. Recent reports show that many developing countries are seeing a sharp depreciation of their currencies. At the same time, many are seeing a major dollar shortage as investors move to the higher-yielding US dollars.
Vodafone received $1.8 billion for its stake in Hungary earlier this year. In India, progress on Vodafone Idea has been made, as I wrote here. Therefore, a case can be made for investing in Vodafone, thanks to its 8% yield coupled with its strong balance sheet. However, its dividend grades are relatively weak, with safety, growth, and consistency ranking at D.
Vodafone dividend safety
Analysts see the company being significantly undervalued, considering that it has a forward PE ratio of 10 vs sector median of 16.45. Its forward EV to EBITDA stands at 6.48, which is lower than the average of 8.57.
Vodafone share price forecast
VOD chart by TradingView
The daily chart shows that the VOD share price has been in a strong bullish trend after bottoming at 83p last year. It has now pulled back at the resistance point at 100p and the 38.2% Fibonacci Retracement level. The 100-day and 50-day exponential moving averages (EMA) are about to make a bullish crossover.
At the same time, Vodafone shares have formed what looks like a bullish flag pattern. Therefore, there is a likelihood that the stock will jump to the 50% retracement point at 107p. A drop below the support at 97p will invalidate the bullish view.
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