Vodafone Idea share price cracks over 14% as Goldman Sachs predicts 83% downside in the stock

Vodafone Idea share price cracked over 14% on Friday after foreign brokerage firm Goldman Sachs predicted an 83% downside in the stock price. Vodafone Idea shares declined as much as 14.44% to a low of ₹12.91 apiece on the BSE.

Goldman Sachs maintained a ‘Sell’ rating on Vodafone Idea shares and raised the target price marginally to ₹2.5 apiece from ₹2.2 earlier, predicting a downside of more than 83% from Thursday’s closing price.

The brokerage firm believes Vodafone Idea's recent capital raise, while incrementally positive, is unlikely to be adequate to stop the company's market share erosion.

Its analysis suggests a direct correlation between capex and revenue market share, and given its expectation of peers spending at least 50% higher capex versus Vodafone Idea, analysts at Goldman Sachs forecast another 300 bps share loss for the company over the next 3-4 years.

“Additionally, Vodafone Idea has large AGR/spectrum related payments starting in FY26; while the government has the option of converting some dues into equity, we estimate ARPUs would have to rise by ₹200-270 (120%-150% under different scenarios) versus December 2024E levels for Vodafone Idea to be sustainably free cash flow neutral, a low probability in the medium term in our view,” Goldman Sachs said in a report.

Excluding the impact from any such potential conversion, it expects FCF to be negative at least until FY31.

The foreign brokerage firm estimates Vodafone Idea’s net-debt-to-EBITDA will remain elevated at 19x by March 2025 (despite the capital raise and tariff increase), and it continues to expect its balance sheet to remain stretched even after potential government conversion of near-term dues into equity.

Moreover, the brokerage also sees limited reasons for Vodafone Idea’s substantial premium to Bharti Airtel and Jio, given its weaker growth, margin returns, and balance sheet profile versus peers, according to the report.

Goldman Sachs also said, “In a blue-sky scenario, where we assume c.65% lower AGR dues, consistent tariff increases and no near-term government repayments (upside risks), we see an implied value per share of ₹19 for Vodafone Idea, implying 26% upside from current levels, vs 83% downside in our base case.”

Technicals

“Vodafone Idea share price is currently trading at ₹13.42, exhibiting significant weakness after breaking below the lower Bollinger Band. The stock had been moving within a congestion zone between ₹18.5 and ₹12.2, but the recent price action signals bearish momentum as it trades below key moving averages, including the 50-day, 100-day, and 200-day moving averages. This alignment below the averages indicates a downward trend, increasing the likelihood of further decline in the near term,” said Mandar Bhojane, Equity Research Analyst at Choice Broking.

According to him, the current price drop is further confirmed by the Bollinger Band breakout, often seen as a sign of increased volatility and potential continuation of the existing trend. The immediate support level to watch is ₹12.20, which, if breached, could lead to deeper declines. Investors and traders should closely monitor this support as a breakdown below could trigger further selling pressure, Bhojane said.

“However, any reversal around this crucial support level could offer a buying opportunity. A bounce-back from ₹12.20 could aim for targets of ₹15 and ₹17.5, representing a potential recovery to previous highs. Traders may consider accumulating near this support level for a medium-term perspective, provided there are signs of price stabilization or reversal in momentum,” he added.

At 10:45 am, Vodafone Idea shares were trading 12.19% lower at ₹13.25 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.