What will the next five years be like for the Vodafone share price?

We will have all come across this company when we must decide which SIM card will give us the most benefits, but as an investor I go beyond the intriguing offers that are aimed at luring customers and do my research on how well the telecom company is doing overall. Vodafone Group (LSE: VOD) has been a major player in the telecom industry since 1982, building over 434 million subscribers by 2014. It currently operates in over 160 countries in Asia, Africa, Europe, and Oceania.

Analysis of the Vodafone share price

Although historical prices are not an indicator of Vodafone shares’ future levels, they are useful in determining a pattern in the share price. It is quite clear from the table below that the company had a good year in 2014 but because of the events mentioned under the next header, the shares have been losing their lustre.

The current market cap of Vodafone is 30.99 billion GBX and 18 analysts have offered a median price target of 176 GBX over the next 12 months. Because of multiple failed ventures, the Vodafone share price has been in a slump since 2014 as the company has amassed a tremendous amount of debt that is also limiting its further expansion.

Attacks at all fronts: Vodafone shares in a slump since late 2014

The telecom sector has been amongst the worst performers in the last five years because of optimistic bets not being paid off and the accumulation of enormous debts. The emergence of 4G and 5G shifted the focus from service providers to a new breed of companies such as Alphabet, Apple, Nvidia and Facebook as these companies could offer investors an enormous growth potential and that too on a diversified front unlike those traditional telecom companies.

The Vodafone share price began climbing in 2014, breaking all previous price levels since 2001; so, in 2015 the company began extending its reach to a global level as it seemed the right time for it, but this could have been one of the biggest reasons for the shortfall of its share price:

• In 2015, Vodafone failed to complete a $120 billion merger deal with Liberty Global, thus hurting investor sentiments and sending its stock price to its all-time low.
• Revenue has decreased over 3.2% each year in Germany, as Vodafone Group couldn’t compete with the local service provider Deutsche Telekom.
• It is often painful to see your favourite football team lose a match, but more painful if they lose at their home ground. Such was the case with Vodafone, as its share price continued to weaken in the United Kingdom due to ‘bad deal making’ over the years.
• With heavy competition from local service providers in India, the Vodafone share price took a dip in the Indian stock market where it is traded under the name of Vodafone Idea. The company lost more than £5.7 billion in just one quarter of 2019, which forced the company to stop its further ventures in the Asian markets.

A sliver of hope for the Vodafone share price

Every coin has two sides and one should look at both the sides before deciding whether to invest.

• Vodafone is still the largest mobile and fixed network operator along with being one of the fastest growing 5G network in Europe.
• It is the leader in mobile payments in Africa with a customer base of 42 million people.
• It has successfully launched a cloud-based television platform in 10 markets across Europe.

An intelligent investor invests in the future by looking at the present of a company. Do I think the positives outweigh the negatives for Vodafone’s share price? My answer to this question is under the next header.

The Vodafone share price is at its 52-week low

The current Vodafone share price offer a good entry, but with no further advancements in its business model, I would not be investing my capital in Vodafone. The company has a consistent dividend record in the past but there has been a major shift from the telecom industries to the other digital industries as to the likes of Facebook, Apple, and Alphabet. The reason for this is that these companies have more growth potential than traditional telecom companies like Vodafone.

The emergence of 5G was supposed to be a breakthrough for the telecom sector but this news was absorbed by the share price of Vodafone as if nothing new has happened in the market. In fact, the share price of other digital companies like Alphabet and Apple saw a rise in their share prices when their products were integrated with the 5G technology. The negatives about the Vodafone share price outweigh the positives, in my opinion. We are living in an era where a breakthrough technology becomes obsolete in just six months, therefore companies must cope with this rising trend to come up with efficient solutions to complex problems. If a technology company cannot do that, then it won’t survive in the next five years in my opinion.

Vincent Abraham has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.