- Vodafone stock has dropped by 35% from its highest point this year.
- The company published its financial results this week.
- It has formed a head-and-shoulders pattern on the daily chart.
Vodafone share price remains under pressure this week after the telecommunications company published its financial results. It has dropped by 35% from the highest point this year, and a head-and-shoulders pattern points to more downside in the near term.
Vodafone Share Price Technicals Points to More Downside
The daily chart shows that the VOD stock price has come under pressure in the past few months. It has slipped from a high of 132.20p in September to the current 115p.
A closer look shows that it is in the process of forming a head-and-shoulders pattern whose neckline is at 115p. It is now hovering near this neckline, which also coincides with the 50% Fibonacci Retracement level.
The stock has dropped below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears have prevailed. It also remains below the Supertrend indicator.
Therefore, these technicals suggest that the stock will continue falling, potentially to the 61.8% retracement level of 110.40.
VOD stock chart | Source: TradingView
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Vodafone’s Business is Facing Major Headwinds
The ongoing Vodafone stock price weakness is happening after the company published its financial results. The earnings showed that its revenue continued to grow in the first half of the financial year.
Its revenue had an organic growth of 5.8%, with Vodafone Business having a record performance. Its total revenue rose by 11.6% because of its recent acquisitions, including that of Safaricom, the top Kenyan telecom company, and Three.
The challenge, however, is that some of its segments are losing customers. In Germany, for example, the contract customer base shrank by 75,000 in the first half of the year, with management citing intense competition. In the UK, the mobile contract customer base fell by 62,000.
The other challenge the company is that its debt has continued rising because of its acquisitions, which are aimed at giving it a stronger market share. Its net debt jumped to €33.5 billion, much higher than €25.4 billion in March. Its cash and equivalents stood at €8.4 billion, also lower than the €12.4 billion it had in March.
Looking forward, Vodafone expects its business to have steady growth. It upgraded its estimates, with the adjusted EBITDAaL expected to be between €13.2 billion and €13.4 billion, and its adjusted free cash flow being between €2.8 billion and €3 billion. While these numbers are better than expected, the upgrade was because of the acquisitions.
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What is your outlook on Vodafone Group Plc?
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