Should Vodafone Take This Deal?

With shares of Vodafone Group Public Limited Company (NASDAQ:VOD) trading at around $26.54, is DAL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Vodafone has a 45 percent stake in Verizon Communications Inc. (NYSE:VZ), and Verizon wants to buy out that stake for full ownership. The original merger took place in 2000, but the business landscape has changed dramatically since that time. These two companies don’t see eye to eye anymore.

Many analysts feel that the deal isn’t feasible due to debt, but Verizon has stated that the deal is indeed feasible, and that a strong wireless business makes a deal easier. There was a potential deal in 2006, but it was eventually rejected.

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Vodafone has been steadily improving cash flow, and the company sold stakes in SFR and Polkomtel for a combined $3.5 billion. Vodafone also receives dividends from Verizon, which allows Vodafone to pay its own dividend and buy back shares. Vodafone currently has 407 million mobile customers, and that number is likely to grow. In addition to that, Vodafone is increasing exposure in emerging markets such as India and Turkey. However, there is one catch, which will be mentioned later. For now, let’s take a look at some important numbers for Vodafone.

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