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Sell Vodacom today as its 3-month long rally stalls

by , 12 November 2019
Sell Vodacom today as its 3-month long rally stalls
Vodacom released interim results yesterday, and it isn't enough to see it push through the critical resistance level above R136.50.

Headline earnings per share came in at R4.60 (half year), which is below the full year 2020 consensus expectation of R9.61. Vodacom will have to do very well in the remaining period to achieve consensus and not disappoint investors.

SA reported mobile service revenue growth of 1.8%y/y in 2Q20, improving on 1Q20 of -1.2%y/y. Excluding change in accounting policy, 2Q20 mobile service revenue growth is 4.2%y/y and is better than MTN SA (-5.1%y/y) in the quarter ended Sept19.

For the half year, EBITDA declined 3.9%y/y impacted by Rain roaming costs and a change in accounting policy. Excluding these one offs, EBITDA would have been +0.6%y/y.

International mobile service revenue was +12.1%y/y in 2Q20 vs +19.6%y/y in 1Q20.

Vodacom has also reduced its dividend to 380c per share but declared a special dividend of 60c per share. Last day to trade is 26 November to qualify for the dividend.

International mobile service revenue was +12.1%y/y in 2Q20 vs +19.6%y/y in 1Q20.
 
Vodacom has also reduced its dividend to 380c per share but declared a special dividend of 60c per share. Last day to trade is 26 November to qualify for the dividend.
 
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Take a look at the chart below to see the resistance level Vodacom needs to break through.

 
As you can see the resistance level at R136.50 is strong and has held Vodacom’s rallies in the past. As investors and traders digest the latest results, I expect some selling pressure to push the price down to around the R120.00 level in the coming weeks.
 
Investors looking to add to their Vodacom holdings should wait for a pull back, and short-term traders can short sell it for the pull back.
 
Sell (short) VOD above R134.50 for a pull back to R120.00. Place a stop loss at R141.00 and trail it lower as the price pulls back.
 
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Sell Vodacom today as its 3-month long rally stalls
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