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Vodafone Group PLC VOD

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Vodafone Posts Uneven Fiscal Q1 Results; Shares Remain Undervalued

Analyst Note

| Michael Hodel, CFA |

Vodafone’s fiscal 2022 first-quarter trading update painted a mixed picture as recovery from the pandemic has been uneven across markets. Growth improved sharply as the firm lapped the worst of the pandemic impact, with consolidated service revenue up 3.3% year over year, excluding currency movements, versus 0.8% last quarter. Management believes pandemic-related items added only 1 percentage point to growth, indicating improved underlying operating performance. While Vodafone doesn’t provide margin or cash flow details with its trading updates, management reiterated its expectations for fiscal 2022 for EBITDA growth of 3%-5% and free cash flow of at least EUR 5.2 billion. We don’t expect to materially change our GBX 185/$26 fair value estimate, and we still believe the shares are attractive. 

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Company Profile

Business Description

With about 270 million wireless customers, Vodafone is one of the largest wireless carriers in the world. More recently, the firm has acquired cable operations and gained access to additional fixed-line networks, either building its own or gaining wholesale access. Vodafone is increasingly pushing converged services of wireless and fixed-line telephone services. Europe accounts for about three fourths of reported service revenue, with major operations in Germany (about 30% of total service revenue), the U.K. (13%), Italy (12%), and Spain (10%). Outside of Europe, 65%-owned Vodacom, which serves sub-Saharan Africa, is Vodafone's largest controlled subsidiary (12% of total service revenue). The firm also owns stakes in operations in India, Australia, and the Netherlands.

Vodafone House, The Connection
Newbury, Berkshire, RG14 2FN, United Kingdom
T +44 163533251
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Sep 30, 2008
Fiscal Year End Mar 31, 2022
Stock Type
Employees 104,755