Telefónica (BME:TEF): Assessing Valuation After Recent Share Price Movement

Telefónica (BME:TEF) shares have experienced some movement recently, drawing attention to the telecom giant’s valuation as sector dynamics continue to change. Investors are now evaluating possible implications for Telefónica’s long-term prospects.

See our latest analysis for Telefónica.

After a solid start in 2024, Telefónica’s share price has cooled off recently, with the latest 7-day return down 3.71%. Even so, momentum remains positive when you step back, as the year-to-date share price return stands at 9.89% and long-term total returns are impressive. The stock has delivered a 45% total shareholder return over three years and more than doubled investors’ money over five years.

If you’re curious what other companies are building long-term value, it’s a great moment to broaden your scope and discover fast growing stocks with high insider ownership

With shares pausing after their recent gains, the key question now is whether Telefónica is trading at a discount or if the recent performance means future growth is already reflected in the price. Could there still be a buying opportunity here?

Most Popular Narrative: 1.5% Undervalued

Telefónica’s most popular narrative suggests its fair value estimate is just above the last close, painting a picture of near-fair pricing with a slight discount. The factors shaping this view go far beyond simple earnings projections and hinge on sweeping changes across the company’s markets and strategy.

*The ongoing acceleration in fiber network and 5G deployment (for example, fiber-to-the-home rollout, expanded premises passed, copper network shutdown in Spain, strengthening of Vivo's fiber leadership in Brazil) positions Telefónica to capture greater customer lifetime value, expand premium service offerings, and improve operational efficiency. This supports both revenue and margin expansion.*

Read the complete narrative.

What’s the math behind the narrative’s subtle undervaluation? This viewpoint leans heavily on ambitious margin expansion and a big jump in future earnings, plus a forward multiple that is usually reserved for higher-growth sectors. Can Telefónica really deliver on these aggressive assumptions, or is there a surprise waiting in the model? See the critical numbers and judge for yourself.

Result: Fair Value of $4.45 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent high debt and tough competition in mature markets could limit Telefónica’s ability to deliver on today’s positive outlook.

Find out about the key risks to this Telefónica narrative.

Build Your Own Telefónica Narrative

If you want to weigh the evidence firsthand or craft your own interpretation of Telefónica’s outlook, you can dig into the data and build a personalized narrative in just a few minutes. Do it your way

A great starting point for your Telefónica research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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