Telefónica, S.A.

Financial Performance

5Y price score: (21)

10Y return: (20.4)%

DATE RANGE:

EUR Per
Share

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3.2

52-week range

4.6

3.649

Your model inputs

Required return / cost of capital

FCFF terminal growth rate

Your fair value & Margin of safety

To calculate fair value based on cost of capital and terminal growth assumptions above, please select free cash flow forecast.

Forecast:

Valuation

Free Cash Flow Yield

20.5 %

Dividend Yield TTM

8.2 %

Market cap

20,538

Price / Earnings TTM

(6.3)

Price / Book TTM

2.9

PEG TTM

-0

Earnings growth and return

LTM

5YR

10YR

Total return (price & dividends)

(14.5) %

15 %

(20.4) %

Free cash flow per share growth

(38.6) %

(26.6) %

(2.8) %

Earnings per share growth

246.7 %

(437.5) %

(258.8) %

Founded: 1,924

Employees: 100,870

Business Summary:Telefónica, S.A., together with its subsidiaries, provides telecommunications services in Europe and Latin America. The company's mobile and related services and products comprise mobile voice, value added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary value-added services; video telephony; intelligent network; and telephony information services, as well as leases and sells handset equipment. The company also provides Internet and broadband multimedia services comprising Internet service provider, portal and network, retail and wholesale broadband access, narrowband switched access, high-speed Internet through fibre to the home, and voice over Internet protocol services. In addition, it offers leased line, virtual private network, fibre optics, web hosting and application, outsourcing and consultancy, desktop, and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection and international wholesale services; leased lines for other operators; and local loop leasing services, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides video/TV services; smart connectivity and services, and consumer IoT products; financial and other payment, security, cloud computing, advertising, big data, and digital telco experience services; virtual assistants; digital home platforms; and Movistar Home devices. It also offers online telemedicine, home insurance, music streaming, and consumer loan services. The company was incorporated in 1924 and is headquartered in Madrid, Spain.

Fair Value Reference Estimate

Latest Earnings Call Takeaways

2026 Q2 (Jul 29, 2026)

1) Strategic Execution and Leadership - Telefónica is focused on becoming a leading gateway for digital technologies through its "Transform and Grow" strategic plan. - The company reported strong execution in Q2 2026, with year-on-year growth in adjusted EBITDA and operating cash flow. - Key leadership includes Marc Murtra (Chairman and CEO), Emilio Rodríguez (COO), and Juan Azcue (CFO). - The company is leveraging AI, automation, and operational excellence to enhance efficiency and customer experience.

2) Financial Performance and Segment Results - Free cash flow reached EUR 611 million in Q2, an increase of EUR 278 million from the previous quarter. - Adjusted operating cash flow after leases is expected to grow over 3% for 2026, up from previous guidance of over 2%. - Service revenue growth was 1.0% in H1, with a strong performance in Spain (2.9% growth) and Brazil (double-digit growth). - Adjusted EBITDA grew by 2.7% year-on-year, with a focus on maintaining margins and controlling costs.

3) Challenges and Headwinds - Germany faced a decline in revenue of over 11% year-on-year, primarily due to a 26% drop in handset sales. - The company anticipates being at the low end of its revenue growth range due to handset weakness. - Operational restructuring in Germany includes a reduction of 1,100 employees and the closure of 60 underperforming shops, with a provision of EUR 265 million recorded in Q2.

4) Operational and Product Plans - In Spain, the company achieved positive net adds for 12 consecutive quarters, with a churn rate of 0.7%. - Brazil's mobile contract net adds grew by 6% year-on-year, with a low churn rate of 1.1%. - New product offerings include Movistar Plus in Spain and partnerships in Brazil for enhanced digital services. - The company is expanding its fiber infrastructure to 77 million premises and enhancing its 5G coverage to 83%.

5) Guidance and Outlook - Telefónica expects a stronger H2 performance compared to H1, particularly in Spain and Brazil. - The company is maintaining its adjusted EBITDA guidance but remains cautious about the overall revenue outlook due to challenges in Germany. - The 2026 dividend of EUR 0.15 is set to be paid in June 2027, reflecting the company's commitment to returning value to shareholders.

Bottom line: Telefónica is demonstrating strong operational execution and financial resilience, particularly in Spain and Brazil, while navigating challenges in Germany. The upgraded cash flow guidance and commitment to strategic investments position the company favorably for future growth, making it a potentially attractive investment for shareholders.

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