Telefónica (BME:TEF): Valuation Perspective Following Sharp Stock Decline and 2025 Outlook Reaffirmation

Telefónica (BME:TEF) recently faced a sharp drop in its share price, moving the stock into oversold territory. However, the company just reaffirmed both its 2025 earnings and dividend outlook, reinforcing confidence among investors.

See our latest analysis for Telefónica.

Telefónica’s share price has dropped sharply in recent weeks, down over 16% for both the past month and the last seven days, as investors reacted to a mix of market volatility and recent earnings announcements. Despite these swings, the company’s long-term story remains positive, with a three-year total shareholder return of 22% and an impressive 49% total return over the past five years. This hints that momentum could quickly return if sentiment shifts.

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With shares trading at a sharp discount to analyst targets and positive guidance ahead, is Telefónica undervalued at today’s price, or is the market correctly factoring in its outlook for future growth?

Most Popular Narrative: 19% Undervalued

The most widely followed narrative places Telefónica’s fair value at €4.51, which is well above the last close price of €3.66. This strong gap drives current investor interest and sets the stage for the underlying assumptions you’ll read below.

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.

Want to unpack the calculation behind this target? The model hinges on ambitious shifts in earnings and margin growth, with future cash flows playing the starring role. If you’re curious about where those bold projections come from, don’t miss the surprising drivers in the complete narrative.

Result: Fair Value of €4.51 (UNDERVALUED)

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

However, persistent high debt and sluggish growth in core markets could challenge Telefónica’s ability to deliver on these optimistic projections.

Find out about the key risks to this Telefónica narrative.

Build Your Own Telefónica Narrative

If you see the story differently or want your own take, it's quick and easy to explore the numbers firsthand and shape your personal narrative. Do it your way

A great starting point for your Telefónica research is our analysis highlighting 4 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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