Telefónica (BME:TEF) Valuation Check After Recent Share Price Drift and Portfolio Reshaping

Telefónica (BME:TEF) has been drifting lower over the past 3 months, even as its longer term 3 year and 5 year returns remain solidly positive. This sets up an interesting valuation reset.

See our latest analysis for Telefónica.

Over the past year, Telefónica’s share price return has slipped back while its three and five year total shareholder returns remain firmly positive. This suggests that recent weakness reflects shifting sentiment more than a broken long term story.

If Telefónica’s pullback has you thinking about where else value and momentum might be lining up, this could be a good moment to explore fast growing stocks with high insider ownership.

With shares lagging despite healthy multi year returns and analysts still seeing upside to their price targets, is Telefónica now trading below its true value, or is the market already factoring in its future growth potential?

Most Popular Narrative Narrative: 19.2% Undervalued

Compared to Telefónica’s last close at €3.65, the most followed narrative points to a higher fair value near €4.51, built on improving profitability.

The completion of large scale portfolio optimization and monetization of non core assets (sale of Argentina, Peru, Colombia, Uruguay, Ecuador, etc.) is reducing geographic risk and freeing up significant capital (€3 billion+). The strategy to focus on core markets (Spain, Brazil, Germany, UK) enables redeployment of resources to higher return areas, improving free cash flow and ROCE.

Read the complete narrative.

Want to see what happens when shrinking revenues meet rising margins and a richer earnings multiple? The narrative hides a bold earnings turnaround story. Curious which cash flow assumptions really justify that valuation jump?

Result: Fair Value of €4.51 (UNDERVALUED)

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

However, stubborn debt levels and weaker growth in mature European markets could undercut the margin gains that this upbeat narrative depends on.

Find out about the key risks to this Telefónica narrative.

Build Your Own Telefónica Narrative

If you are not fully convinced by this view or would rather dig into the numbers yourself, you can build a complete narrative in minutes, Do it your way.

A great starting point for your Telefónica research is our analysis highlighting 3 key rewards and 3 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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