Still in the mood of Thanksgiving, we will round off this week of options trading with another exploration of stocks in the Telecommunications industry. In today’s piece, we will examine the options of Vodafone Group Plc (NASDAQ:VOD). Vodafone with its market capitalization of $95.09B is a mobile communications company.
Vodafone Red offers consumers and businesses a package with mobile data allowances, unlimited calls and texts, plus cloud and back-up services to secure personal data. Vodafone Cloud allows customers to store their personal digital content, such as contacts, photos and videos in the Vodafone network and to access it on the move from any connected device. Vodafone Secure Device Manager gives customer a way to manage many of their smart devices.
Interesting Share Performance
Shares of Vodafone are trading up 2.44% to $36.52 as at 12:09PM EST today from a 52-Week low of $28.63 and a 52-Week high of $42.14. Today’s trading price marks a 15.38% discount to the 52-Week high while marking a 27.55% premium to the 52-Week low.
The chart above (with my annotations) shows how the shares of Vodafone have traded within the last one year. You will observe that the stock has three major resistance lines (Red) at $34, $37 and $40 respectively.
You will notice that Vodafone has broken out above the first $34 resistance and it has soared to the current $36 trading price. The next resistance point is $37 and it appears that the bullish momentum will be strong enough to carry the stock above the $37 resistance.
Nonetheless, it might not be smart to expect the current bullish momentum to carry the stock above the $40 resistance point. For one, Vodafone current trades above its 50 and 200-day moving averages of $32.68 and $33.73. Hence, the current bullish momentum might taper out before the stock reaches $40. Secondly, Vodafone trades with an RSI of 74.99, which suggest that the stock has entered “overbought” levels; hence, the buying action is not likely to continue on the stock.
Strength in Emerging Markets
Last week, Vodafone released its Half Year 2014 earnings report and many analysts will have a hard time finding many good reasons to cheer Vodafone on. For one, the company’s Adjusted Earnings per share dropped 46.5% on an annual basis. However, we can find solace in the fact that the company’s revenue jumped by 8.9% over the revenue from the same period in the last.
I am especially impressed by the fact that the growth in revenue was precipitated by an 18.6% increase in sales from the European region at a time when many telecoms consider the European market matured. However, the main reason behind my optimism in Vodafone is the company’s strong performance in emerging markets.
Vodafone reports that its top growth markets are Ghana, India, and Turkey even though some weakness was observed in Egypt. Interestingly, Vodafone has some 310 million customers in emerging markets in relation to a 436 million total customer count. In addition, Vodafone was able to generate some $24.4B in revenue and $7.7B in EBITDA from these emerging markets.
How to Trade VOD Options
I am optimistic about the prospects of Vodafone going forward even though I expect the current bullish rally to peak out around $40. Buying VOD call options are in order and I recommend buying the VOD Jan 2015 37.000 call (VOD150117C00037000) at an asking price of $1.10.
— Daily Option Alerts