After a 21% crash in 3 years, is this one of the best UK stocks to buy now?
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I think some of the best stocks to buy are fallen giants that have lost their appeal to investors.
But deciding which ones to buy isn’t always easy. After all, a drop in share price may be a sign of an underlying problem. However, this is not always the case. Sometimes, a stock can fall out of favor because of short-term problems that won’t last.
Here’s the biggest name the stock market rating tank has seen in the past three years. But is it a value trap or a bargain? Let’s take a closer look.
Previous number
More than 26 years ago, on January 17, 2000, Vodafone(LSE:VOD) shares rose 6.7% to 351p making it the most valuable company FTSE 100. At the time, the communications group was valued at £109.1bn. How times have changed. Today (6 February), it has a market value of £25.5bn. On this basis, I think it pretty much meets the description of a fallen giant.
And after a painful and long period of restructuring, there are signs that the corner is beginning to turn. The group has exited a number of markets, particularly Spain and Italy, in an attempt to improve its return on investment. In the UK, it has merged its operations with Three. As a result, VodafoneThree is now the largest mobile network in the country with 28m customers.
As a sign of confidence, it also raised its interim profit for the year ending 31 March 2026 (FY26) by 2.5%. It hopes to do the same with its final payment. If it does, then the stock’s forward yield is 3.7%.
Latest update
On Thursday (5 February), the group published its trading update for Q3 FY26. It said it expects its full-year result and free cash flow to be at the lower end of guidance. Reported “good service revenue momentum” in Europe, Africa, and Türkiye. Importantly, in Germany, there was growth for the second quarter in a row. The group was struggling here because of a change in the law that prevents landlords from combining television contracts with tenants.
However, investors were not impressed. Shares closed the day 4.7% lower. I suspect they didn’t like that the group’s organic service revenue growth was 5.4%, compared to 5.8% for Q2. Alternatively, some shareholders may have cashed out after the recent mini-meeting.
My opinion
But in my opinion, I still think the group’s shares offer good value. Both income and cash flow are going in the right direction. And while the group’s service revenue growth slowed in the quarter, I remember that recovery is rarely smooth. IGA senior market analyst was positive, describing Vodafone’s performance as “one of FTSE’s most impressive stories“.
However, the opinions of analysts seem to be divided. In January, Deutsche Bank set a 12-month price target of 150p. Citi raised his to 100p. The consensus is 104p, about 4% below the current share price.
Although the group still faces significant challenges, not least strong competition in its key markets and a high debt load, I have seen enough to believe that the stock should be considered by long-term and patient investors. I doubt it will ever be the number one FTSE again but I hope it will climb higher in the coming years.
