Vodafone Share Price Eyeing Breakout from Range Amidst Strategic Overhaul

Vodafone's share price (LON:VOD) is showing signs of potentially breaking free from a two-year trading range, aided by recent strategic moves and a renewed focus on shareholder value. VOD closed at 77.64p yesterday, and up 12.72%, signalling continued momentum on the path to retest recent highs of 79.50p.

Vodafone's stock has been trading within a 52-week range of 62.40p to 79.50p, with the 70 handle proving to be where value feels most comfortable over the past two years or so.

Strategic mergers, asset sales, and buybacks fuel optimism for Vodafone’s shares, but challenges remain.

However, the recent completion of the Vodafone UK and Three UK merger could prove to be a pivotal moment. The newly formed VodafoneThree Holdings Limited, a joint venture with Vodafone holding a 51% stake and CK Hutchison 49%, creates the UK's largest mobile network with approximately 29 million subscribers.

This merger is projected to significantly enhance 5G coverage and infrastructure investment, with a commitment to invest £11 billion over the next decade. While concerns remain about potential reduced competition and price increases, the market appears to be cautiously optimistic about the long-term benefits of this consolidation.

Further bolstering investor confidence is Vodafone's strategic decision to sell its Italian business to Swisscom for €8 billion. This move is designed to streamline operations and reduce the company's debt burden. As part of its commitment to returning value to shareholders, Vodafone plans to execute a €4 billion share buyback program.

However, the company has also announced a reduction in its annual dividend to 4.5 cents starting in 2025, down from the previous 9 cents. While a dividend cut is typically viewed negatively, the market reacted positively, with the stock price rising over 3% upon the announcement, suggesting investors believe the long-term gains from the restructuring outweigh the immediate loss in dividend income. This is further supported by CFO Luka Mucic's purchase of shares worth £256,213, coinciding with the announcement of a €500 million share repurchase program, signaling confidence from within the company.

Vodafone's commitment to growth extends beyond Europe. Its subsidiary, Vodafone Idea, has secured a significant ₹30,000 crore (approximately $3.6 billion) deal with Nokia, Ericsson, and Samsung for network equipment supply over three years. This agreement is part of a larger $6.6 billion capital expenditure plan aimed at expanding 4G coverage and launching 5G services in key Indian markets.

Technically, Vodafone's stock is currently trading above both it's 200-day moving average of 70.52p and its 50-day moving average of 73.62p. The upcoming earnings report on July 1, 2025, will be crucial in determining the direction of the stock. The last half-year earnings of 0.03p per share exceeded estimates, with estimated earnings for the next half-year the same. A positive earnings surprise could provide the catalyst for a breakout above the recent high, potentially opening the door for further gains.

However, challenges remain. Vodafone faces regulatory and competitive pressures in the German market, and analyst ratings are mixed.

JP Morgan downgraded the shares to ‘Underweight' from Neutral, with the price target also lowered to 62p (from 72p). This came as the firm re-rates European telco shares, with Vodafone flagged as “funding short”. Citi did however raise their price target to 70p (from 66p), albeit with a Neutral rating held in place, at a level that sits below current price action.

The average price target does represent some healthy upside, although operational execution is likely to be pivotal.

The recent strategic moves, including the UK merger, the Italian business sale, and the share buyback program, have the potential to unlock significant value. However, the company faces challenges in key markets, and the dividend cut could impact investor sentiment.

The upcoming earnings report and the successful execution of its strategic plan will be factors in determining whether Vodafone can sustain its current momentum and break free from its recent trading range.