Vodafone (LON: VOD) share price popped on Wednesday and then sharply pulled back before the market closed. The stock jumped to a high of 68.70p and then retreated and settled at 65.37p. Still, the highly embattled company is trading about 30% below its highest point in 2023.
Can Vodafone be acquired?Vodafone stock price plunged for apparently no major reason on Wednesday, which explains why it then pulled back sharply. However, there was some speculation as to why the stock became this volatile.
In a note, SeekingAlpha noted that there was speculation that Vodafone could become a takeover target. Besides, it is one of the top blue-chip companies in the FTSE and one whose stock has shed almost 50% of its value since 2020.
The speculation is that the company could be bought by an American telecommunication company. If this is the case, some of the potential acquirers would be the likes of AT&T, T-Mobile, and Comcast. A private equity company may also be interested.
However, I believe that Vodafone will not be acquired for a few reasons. First, all these potential acquirers are dealing with huge debt burdens that they might not be interested in. AT&T has over $126 billion in debt while Comcast and Verizon have over $95 billion and $147 billion, respectively.
Second, Vodafone is not a cheap company in real terms. It has a market cap of over $21 billion and a mountain of over 41 billion euros. Its total liabilities stand at over 28 billion euros, which is not cheap.
Third, Vodafone is a conglomerate that has a presence in over 26 countries. Most companies are now focusing on simplifying its operations, meaning that no likely acquirer will want this. And most importantly, Vodafone’s business is not doing well as its growth has fizzled.
The other reason why the stock jumped is speculation that one of its top investors was adding to his stake. Also, there is a chance that the company may have received a better offer for its Italian business. As I wrote here, the company recently rejected an 11 billion euro offer for this business.
Taken together, I believe that Vodafone faces numerous challenges in the coming years as its growth momentum slows.
Vodafone share price forecast
Vodafone has not been a good investment over the years. £10,000 invested in the company at its peak in 2019 would now be worth only £5,245. A similar amount invested in a passive ETF like Invesco QQQ would be worth almost double the amount.
Sadly, there are no major fundamental catalysts that will push the company higher in the coming months. Technicals are also not encouraging, as shown on the weekly chart above. The stock has remained below the key support level at 68.77p, the lowest swing in March 2020 after the pandemic broke out.
The shares remain below all the relevant moving averages. Therefore, the path of the least resistance for now is downwards, with the next point to watch being the psychological point at 60p. A move above the resistance at 68.77p will invalidate the bearish view.
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