Will Vodafone Stock Push Higher After Recent News?

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With shares of Vodafone (NYSE:VOD) trading around $31, 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. The firm has an investment in the U.S.-based Verizon Wireless (NYSE:VZ).

Vodafone confirmed it’s in discussions with Verizon to sell its 45 percent stake in Verizon Wireless. People familiar with the matter who spoke to Bloomberg said the deal would be worth around $130 billion. The move would help Vodafone CEO Vittorio Colao pour cash into the company’s sagging European businesses, which have suffered from the economic downturn there.

T = Technicals on the Stock Chart Are Strong

Vodafone stock has trended higher over the past several quarters. The stock is currently 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 signals 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

28.96%

96%

95%

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

Put IV Skew

Call IV Skew

September Options

Flat

Average

October 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 significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Mixed 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 mixed earnings and revenue figures over the past four quarters. From these numbers, the markets have been relatively 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

25.53%

10.86%

-0.15%

17.81%

12.47%

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

Conclusion

Vodafone provides telecommunications services and related products around the world. The company is currently in discussions to sell its stake in Verizon Wireless. The stock has been trending higher and is currently trading at highs for the year. Over the past four quarters, investors have been relatively pleased with the company, as earnings and revenues have been mixed. Relative to its peers and sector, Vodafone has been a year-to-date performance leader. Look for Vodafone to OUTPERFORM.

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