Tuesday, Benchmark initiated coverage on VEON Ltd (AS:VON) (NASDAQ:VEON (NASDAQ:VEON)) shares with a Buy rating and a price target of $48.00. The firm highlighted VEON's potential as a unique investment opportunity in the telecommunications sector, particularly in mobile connectivity and digital services across five high-growth frontier markets. These markets include Pakistan, Ukraine, Kazakhstan, Bangladesh, and Uzbekistan, which are significant for VEON in terms of revenue.
VEON's strategy focuses on the deployment of 4G technology, which remains the most suitable and cost-effective option for consumers in these regions. The company has set ambitious goals for the year 2027, aiming for substantial growth in both top-line revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in local currency terms.
The company's projections for 2027 include a Compound Annual Growth Rate (CAGR) of 16-19% in top-line revenue and 19-22% in EBITDA, based on figures from 2023. Additionally, VEON expects to see a 3% increase in margins and generate between $900 million and $1 billion in Equity Free Cash Flow (EFCF) by the end of 2027.
VEON's digital service initiatives, specifically DO1440 and AI1440, are anticipated to reach half of the company's multiplay customer base by 2027. This follows a trend of approximately 15% CAGRs in revenues and EBITDA since the 2021 Capital Markets Day (CMD) in local markets.
The analyst noted that growth in U.S. dollar terms may be lower due to currency fluctuations and relative inflation, with particularly challenging comparisons expected for the fourth quarter of 2024 and the first half of 2025 after the post-election U.S. dollar rally.
In other recent news, VEON Ltd. has initiated its delisting process from Euronext (EPA:ENX) Amsterdam, intending to centralize its share trading on the Nasdaq Capital Market. The company's CEO, Kaan Terzioglu, stated that this move aligns with VEON's long-term strategy and will enhance liquidity and streamline reporting processes. The delisting is expected to take effect three days after the cessation of trading on the Dutch exchange on November 22, 2024.
Furthermore, VEON has reported robust growth in its recent Q2 2024 earnings, with U.S. dollar revenues witnessing a rise of 12.1% year-over-year and Group EBITDA increasing by 10.6% during the same period. This growth is attributed to the company's focus on digital strategy and 4G network expansion, leading to digital revenues now accounting for 10% of the total revenues in the first half of 2024.
However, VEON also faced challenges due to a cyber-attack in Ukraine, impacting revenue and EBITDA by approximately $46 million and $47 million, respectively. Despite these setbacks, the company anticipates continued revenue growth of 16-18% and EBITDA growth of 18-20% for the full year of 2024. These are recent developments that provide insight into VEON's performance and future expectations.
InvestingPro Insights
VEON's recent performance aligns with Benchmark's optimistic outlook. According to InvestingPro data, the company has shown impressive growth with a 68.38% year-to-date price total return and an 86.87% one-year price total return. This strong performance is reflected in an InvestingPro Tip noting that VEON is trading near its 52-week high, with its current price at 97.56% of the 52-week peak.
The company's financial health appears robust, with revenue growth of 6.53% over the last twelve months and a notable 12.12% quarterly revenue growth as of Q2 2024. VEON's profitability is also evident, with an EBITDA of $1.703 billion and an EBITDA growth of 19.42% over the same period. These figures support the InvestingPro Tip that VEON has been profitable over the last twelve months.
While VEON's growth prospects look promising, investors should be aware that the stock price movements can be quite volatile, as highlighted by another InvestingPro Tip. This volatility could present both opportunities and risks for potential investors.
For those interested in a deeper analysis, InvestingPro offers 8 additional tips for VEON, providing a more comprehensive view of the company's financial position and market performance.
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