Is Vodafone Stock Enticing at These Prices?

With shares of Vodafone (NYSE:VOD) trading around $29, 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 include: 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). Consumers and companies across the globe aim to connect and interact at increasing rates. With such a large global presence, look for Vodafone to be a major communications provider around the world.

Just recently, Vodafone reported its fiscal first-quarter earnings, which were on par with analyst expectations. The company has not been doing very well due to the recession in Europe, as well as increased regulation. Regulators in Europe have also ordered wireless carriers to make price cuts, so Vodafone expects those rules will hurt the company’s revenue in the next quarter as well.

T = Technicals on the Stock Chart are Strong

Vodafone stock been struggling over the last couple of years. The stock is currently sitting near the top of a price range that it has been trying to break above. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are 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 slightly above its rising key averages, which signals neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

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

As of today, 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.

On the next page, let’s take a look at the earnings and revenue growth rates, and what that means for Vodafone’s stock.

E = Earnings Are Mixed Year-Over-Year

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions can also 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?

Vodafone has seen mixed earnings and revenue figures over the last three years. From these numbers, it seems the markets have been optimistic about 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), Sprint Nextel (NYSE:S), and the overall sector?

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

Conclusion

Vodafone is a supplier of communications products and services worldwide. Increased regulation and a European recession have the company worried. However, the firm still managed to meet analyst expectations during a recent earnings report. The stock is currently sitting near the top of a range that it has been trying to break above. Over most of the last three years, investors in the company have been optimistic, as earnings and revenue figures have been mixed. Relative to its peers and sector, Vodafone has been a year-to-date performance leader. WAIT AND SEE what Vodafone does in coming quarters.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.