Headquartered in Amsterdam, the Netherlands, mobile and fixed-line telecommunications services provider VEON Ltd. (VEON) serves roughly 212 million customers across nine countries, including Russia, Pakistan, Bangladesh, and Ukraine. Over the past month, its  stock price has advanced  4.2% to close yesterday’s trading session at $1.74, driven primarily by investors’ optimism about its several strategic acquisitions and expanding portfolio of products and services.

The stock has retreated 1.7% over the past six months and 41.6% over the past three years, however. In addition, earlier this month, VEON announced that it had exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium Telecom Algérie SpA, to the Algerian National Investment Fund, Fonds National d’Investissement (FNI).

Furthermore, the company continues to be impacted by the exposure to currency exchange rate volatility and specific country risks because it is focused on emerging markets. So, its near-term prospects look uncertain.

Here’s what we think could influence VEON’s performance in the coming months:

Positive Developments

On June 16, VEON announced  that it had acquired a majority stake in OTM, one of the largest players in the Russian AdTech market. The company also completed the acquisition of the 15% minority stake in PMCL in March 2021, an arm of Pakistan’s leading mobile operator, Jazz.

Beeline, VEON’s operating company in Kazakhstan, launched its first digital payment card integrated with its mobile financial services offering last month. In February, the company formed  partnership with Mastercard Incorporated (MA) to boost digital financial services in key markets. Also, in January, Beeline completed a large-scale project to improve the quality and availability of mobile internet in Moscow. It includes the redistribution of the 2100 frequency range from 3G to 4G and expanding the frequency range used in the 4G network from 30 to 45 MHz.

Mixed Financials

For the first quarter, ended March 31, 2021, VEON’s net income increased 15% year-over-year to $138 million. The company’s EPS for the quarter came in at $0.07 compared to $0.06 in the prior-year quarter. However, its total revenue decreased 5.2% year-over-year to $1.99 billion. In addition, VEON’s revenue from Russia declined 9.8% year-over-year to $920 million in the quarter, while its revenue from Uzbekistan was $45 million, down 18.2% year-over-year. Its net debt also increased 7.5% year-over-year to $8.33 billion.

Taking Loans to Fund Growth Activities

On June 24, 2021, VEON’s Jazz secured a PKR50 billion (roughly $320 million) syndicated credit facility. This 10-year facility is expected to be used to finance the company’s ongoing 4G network rollouts, technology upgrades and to address upcoming debt maturities. It entered a new multi-currency revolving credit facility agreement on March 10, 2021. And VEON’s operating company in Ukraine, Kyivstar, signed three bilateral unsecured loan agreements in December 2020. These loans are expected to increase the company’s interest expense.

POWR Ratings Don’t Indicate Enough Upside

VEON has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, VEON has a C grade for Stability, which is consistent with its 1.33 beta.

The stock has a D grade for Growth. This is in sync with analysts’ expectations that VEON’s EPS will decline at a 29.1% rate  per annum over the next five years.

VEON has a D grade for Momentum also, in keeping with its 1.7% loss over the past six months and 1.1% loss over the past year.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated VEON for Sentiment, Value, and Quality. Get all the VEON ratings here.

VEON is ranked #18 of 51 stocks in the Telecom – Foreign industry.

If you’re looking for top-rated stocks in the same industry with an Overall POWR Rating of Strong Buy or Buy, you can access them here.

Bottom Line

Analysts expect VEON’s revenue to increase 3% year-over-year to $8.22 billion in its fiscal year 2021, and its EPS to increase 22.2% year-over-year to $0.11 for the quarter ending September 30, 2021. However, the company is currently expanding its 4G network services when most countries are making significant advances in the 5G space. Moreover, VEON is currently trading lower than its $1.80 and $1.77 respective 50-day and 200-day moving averages, indicating that the stock is in a downtrend and could continue declining in price. So, we think it’s wise to wait for a better entry point.

VEON shares rose $0.02 (+1.15%) in premarket trading Thursday. Year-to-date, VEON has gained 16.56%, versus a 17.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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