Stock of the Day

August 26, 2019

Telefónica (TEF)

$4.32
+$0.06 (+1.3%)
Market Cap: $24.15B

About Telefónica

Telefónica, S.A., together with its subsidiaries, provides telecommunications services in Europe and Latin America. The company offers mobile and related services and products, such as mobile voice, value added, mobile data and internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. It also provides fixed telecommunication services, including PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary value-added services; video telephony; intelligent network; and telephony information services, as well as leases and sells handset equipment and telephony information services. It also provides Internet and broadband multimedia services comprising internet service provider, portal and network, retail and wholesale broadband access, narrowband switched access, security, internet through fibre to the home, and voice over internet protocol services. In addition, the company offers leased line, virtual private network, fibre optics, web hosting and application, managed hosting, content delivery, outsourcing and application, desktop, and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection and international wholesale services; leased lines for other operators; and local loop leasing services, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides video/TV services; smart connectivity and services, and consumer IoT products; financial and other payment, security, cloud, advertising, big data, and digital experience services; Aura; open gateway, living apps; smart Wi-Fi, Phoenix, NT, Solar 360, and Movistar Home devices. Telefónica, S.A. was incorporated in 1924 and is headquartered in Madrid, Spain.

Telefónica Bull Case

Here are some ways that investors could benefit from investing in Telefónica, S.A.:

  • Telefónica, S.A. has a positive return on equity of 10.10%, indicating effective management in generating profits from shareholders' equity.
  • The company recently declared a semi-annual dividend of $0.1576 per share, providing a yield of 5.2%, which can be attractive for income-focused investors.
  • Institutional investors have shown increased interest, with FMR LLC growing its stake by 8.3%, suggesting confidence in the company's future performance.
  • Telefónica, S.A. offers a diverse range of telecommunications services, including advanced internet and broadband multimedia services, which positions it well in a growing market.
  • The current stock price of Telefónica, S.A. reflects its market position and potential for growth, making it a consideration for investors looking for value opportunities.

Telefónica Bear Case

Investors should be bearish about investing in Telefónica, S.A. for these reasons:

  • The company has a negative net margin of 2.84%, indicating that it is currently spending more than it earns, which could raise concerns about profitability.
  • Telefónica's payout ratio is currently -84.62%, suggesting that the company is paying out more in dividends than it is earning, which may not be sustainable in the long term.
  • Recent cuts to dividends may signal financial strain, which could deter income-focused investors looking for stable returns.
  • Increased competition in the telecommunications sector could impact Telefónica's market share and profitability, posing risks for investors.
  • The company's reliance on various international markets exposes it to geopolitical and economic risks, which could affect its overall performance.

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