On Wednesday, Citi revised its price target for Vodafone (NASDAQ:VOD) Idea Ltd. (IDEA:IN), reducing it to INR22.00 from INR23.00, while continuing to endorse the stock with a Buy rating. The telecommunications company reported first-quarter revenues for the fiscal year 2025 at Rs105 billion, which was a 1% decline quarter-over-quarter and slightly below the firm's projections.
Vodafone Idea's subscriber losses remained unchanged, but the revenue miss was attributed to average revenue per user (ARPU) levels that did not increase as anticipated. The company was expected to see a rise in ARPU following recent tariff hikes, but these benefits are now projected to emerge in the second quarter.
The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) excluding Indian Accounting Standards (IndAS) also experienced a 4% quarter-over-quarter decrease to Rs21 billion, falling short of expectations by 2%.
Despite these setbacks, Vodafone Idea's net losses for the quarter improved, contracting from Rs77 billion to Rs64 billion. This improvement was more favorable than the anticipated Rs76 billion loss and was primarily driven by an increase in other income, which followed an equity raise, and a reduction in interest expenses due to the reversal and writeback of some previous charges.
The financial performance of Vodafone Idea indicates that while the company is facing challenges with revenue and earnings, there are positive signs in its ability to narrow losses. The equity raise and the management of interest expenses have contributed to this improved financial outcome.
Investors and market watchers will likely keep an eye on Vodafone Idea's performance in the upcoming quarter, as the anticipated benefits from the tariff hikes are expected to materialize. This could potentially lead to an improvement in ARPU and a more robust financial position for the company.
Vodafone Idea's stock performance and future projections will continue to be influenced by its ability to manage costs, retain subscribers, and capitalize on revenue-generating opportunities such as tariff increases.
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