Is VEON Stock A Buy?

VEON Ltd (NASDAQ:VEON) is a Dutch telecommunications company based in Amsterdam. It was founded in 2009 and quickly established and expanded services in emerging markets in Asia, Africa, and Europe. Today, it’s one of the top 10 largest mobile operators by subscribers, with 214 million subscribers, predominantly in Russia.

So, is VEON stock a Buy?

VEON Stock May Be A Value Investment

As the race to 5G heats up, the company could represent a value buy for investors.  Sure, it’s a relatively small player compared to giants like AT&T (T), Comcast, and Verizon.

But mobile and fixed-service data have become an even bigger business as work, play, and school has moved to a virtual environment from home.

If the company can upgrade its networks and provide steady service that customers value, it could easily grow back to pre-pandemic levels of growth and value. It’s not going to be an easy road though, so let’s make a call on it.

VEON Has Telecoms & Digital Assets

VEON’s biggest assets are in telecommunications services. It’s still maintaining 4G networks in emerging markets that are slow to upgrade to 5G, including countries like Pakistan, Kazakhstan, and Ukraine.

It also runs a variety of digital content streams, like Beeline TV in Russia and Toffee TV in Bangladesh. This makes it similar in structure to the likes of AT&T and Verizon, although it’s still running a generation behind in its technologies.

It also will likely mean that the company will continuously lag behind the other frontrunners in terms of market capitalization. The flipside is that the same value opportunity could make it a value buy for new investors who may be slower to react to market conditions. 

VEON’s financials will help us figure out if the stock is a good investment.

Is VEON Stock A Buy?

VEON shares are down from the $4-$5 range that the company traded at during 2016-2018. This is largely due to the impact of the coronavirus. As people moved inside, mobile data was less necessary. But that’s only one part of the company’s woes, which we’ll discuss more in the next section.

The company’s market capitalization has been plateauing around $2.5 billion, and its global footprint is helping offset financial problems in Russia, where it lost $790 million. This was essentially due to phone payment forbearance that was used to help keep the Russian economy afloat during the pandemic.

Still, it increased its customer base by 3 million users in the most recent reported quarter and anticipates steady recovery through the end of the 2020 fiscal year. Buying now could represent a value for those looking to gain over the next five years. However, it’s unclear how long the 4G infrastructure will remain relevant.

VEON May Fall Behind The Technology Curve

The biggest risk to buying VEON stock is that technology moves incredibly fast. It wasn’t uncommon in the conversion from 3G to 4G to find many municipalities and organizations overspent on outdated technologies that can no longer be used.

As major players like those listed above continue their expansions, VEON will need to find other ways to serve its users.

Still, the 5G rollout is moving slowly. And it’s becoming clear that countries with struggling populations and economies will be slower to upgrade to higher-speed internet. Over time, this technology gap is going to continue widening and translating to productivity, money, and ultimately profits.

Of course, VEON could easily sell its assets and seek a buyout from a larger company. This would protect shareholders – who get rolled over as shareholders of the acquiring company. It’s unclear how the terms of such a buyout should occur, nor whether the company would choose such an option at an opportune time.

With its value so low, VEON can represent big wins or losses for whomever braves the investment. And it’s not alone in its market.

VEON Competitors Win?

VEON has a lot of big competitors in the telecommunications race, and we only name North American competition.

It’s also ignoring the secondary market of providers using the established networks of AT&T (T), T-Mobile, and Verizon (VZ), much less high-speed fiber optic connections laid by companies like Comcast, Cox Communications, and even Google (GOOG) and Apple (AAPL).

The next generation of broadband is coinciding with the Internet of Things and an Industrial Revolution that includes a high level of automation. Because it services geographical markets that are lagging behind, VEON is likely to continue trailing these companies in revenues, earnings and growth.

But that doesn’t mean it’s facing an impossible battle. Its bandwidth could prove to be enough to maintain current customers while growing its base. It can forge partnerships that enable it to expand into the next generation. All hope is not lost for this scrappy underdog.

Is VEON Stock A Buy? The Bottom Line

VEON is a telecommunications company based in the Netherlands but with operations surrounding the globe. It’s especially focused on the 4G networks still in use by countries with emerging economies.

While this will continue generating revenues in the short term, it’s unclear how the company will fare in the long-term, especially as the 5G infrastructure ages and is upgraded.

It’s facing large competition from enterprises that are much better equipped, but it’s not going into battle alone.

The low market cap and share prices give it huge growth potential during the economic recovery over the next five years. And because it’s not pouring money into a massive 5G upgrade like other providers, it can maintain operational costs and scale with much more growth potential. This gives some investors a bullish outlook on this utility stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.