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Telefonica SA ADR TEF

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Morningstar’s Analysis

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Economic Moat

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Capital Allocation

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Telefonica Keeps Reducing Exposure to LATAM; Dividend Reduced to EUR 0.30 Per Share; Maintaining FVE

Analyst Note

| Denise Molina, CFA |

Narrow-moat Telefonica reported fourth-quarter results with both revenue and EBITDA above consensus expectations. Revenue was EUR 10.9 billion, down 12% on a reported basis due to currency headwinds from Latin America. EBITDA margin was 34.4%, 30 basis points down organically year over year. Free cash flow for the full year beat management's initial guidance of EUR 4 billion, reaching EUR 4.8 billion. We are maintaining our fair value estimate of EUR 8.7.

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Company Profile

Business Description

Telefonica is the incumbent telephone operator in Spain, which accounts for about 29% of the group's sales as of 2020. Besides Spain; Brazil, Germany and U.K. are key markets. Management intends to spin off its Latin American operations, except Brazil. The firm has launched two new business units: Telefonica Tech and Telefonica Infrastructure. Telefonica Tech, a B2B segment offers cybersecurity, the Internet of Things, big data, and cloud services. Telefonica Infrastructure manages the firm's infrastructure assets (towers, antenna systems, data centers, and greenfield fiber projects).

Contact
Distrito Telefonica, Edificio Central. Planta 3, Ronda de la Comunicacion S/N
Madrid, 28050, Spain
T +34 914828700
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 112,797

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