Will Vodafone Stock Continue to Rise?

With shares of Vodafone (NASDAQ:VOD) trading around $33, is VOD an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Vodafone is a mobile communications company that provides a range of communication services and operates across the globe. The firm’s products and services cover voice messaging, data, fixed-line solutions, and devices to assist customers in meeting their total communications needs. Vodafone operates in three geographic regions: Europe, Africa, and Central Europe; Asia Pacific; and the Middle East.

Vodafone has reached a deal with Verizon Communications (NYSE:VZ) to sell its stake in Verizon Wireless. Also, Vodafone’s customers in Germany are now vulnerable from a cyberattack on the company in which hackers stole the personal information of 2 million Vodafone Germany customers. The hackers weren’t able to obtain credit card information, PIN numbers, or passwords, but did access information on customers’ birth dates, names, addresses, gender, and account numbers. Vodafone said a suspect has been identified and that his home was searched.

T = Technicals on the Stock Chart Are Strong

Vodafone stock has been steadily rising over the past several years. The stock is now trading at highs for the year and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Vodafone is trading above its rising key averages, which signal neutral to bullish price action in the near term.

VOD

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Vodafone options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Vodafone Options

20.50%

16%

15%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

October Options

Flat

Average

November Options

Flat

Average

As of Thursday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Decreasing Quarter Over Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Vodafone’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Vodafone look like and, more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

N/A

739.36%

-32.34%

-88.07%

Revenue Growth (Y-O-Y)

N/A

-5.74%

-1.96%

8.87%

Earnings Reaction

0.23%

0.33%

-2.25%

3.12%

Vodafone has seen decreasing earnings and revenue figures over the apst four quarters. From these numbers, the markets have been pleased with Vodafone’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Vodafone stock done relative to its peers – Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile US (NASDAQ:TMUS) — and sector?

Vodafone

Verizon

AT&T

T-Mobile US

Sector

Year-to-Date Return

31.58%

8.44%

1.84%

28.37%

15.86%

Vodafone has been a relative performance leader, year to date.

Conclusion

Vodafone provides telecommunications services and related products around the world. The company has recently reached an agreement to sell its stake in Verizon Wireless to Verizon Communications. The stock has been moving higher in recent years and is now trading at highs for the year. Over the last four quarters, earnings and revenues have been declining. However, investors have been pleased with what they have heard during earnings announcements. Relative to its peers and sector, Vodafone has been a year-to-date performance leader. Look for Vodafone to OUTPERFORM.

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