Telefónica extends the punishment on the stock market and the price hits almost two-year lows

Telefónica prolongs the falls in the stock market experienced this Tuesday and reaches the mid-session with a decline of 4.4%, to 3.56 euros per title. The ‘teleco’ is deepening its losses after experiencing what has been its worst day in five years, which has led it to be trading at a low since February 2024. The market has penalized the fact that the telecommunications operator reduced its free cash flow forecasts and anticipated a higher debt ratio at the end of the year. However, the surprise has come from the dividend, which will reduce it by half starting in 2027.

“The company sees the consolidations in the market as a key pillar of your strategic plan, but without mentioning any tangible objectives; its dividend prospects are reduced as expected, but the pace of debt reduction also disappoints,” they maintain from JP Morgan. The last dividend cut carried out by Telefónica was in 2020, when it cut the scissors by 25%. Over the last three decadesthe company has reduced its dividend up to three times. In 1998 it reduced it by 28%, in 2012 it suspended it and then in 2020.

“Telefónica aims achieve 2.5x leverage for 2028, higher than expected, especially if the dividend cut is taken into account”, they state from Morgan Stanley. AllianceBernstein focuses on the need to be cautious regarding the change in the definition of free cash flow, with the aim of offering a “more accurate picture” of recurring operating cash. “Investors should be cautious when using this metric for cash generation of telecom companies, as its scope can be modified to will by the management teams“, they maintain.

For analysts XTB, these results reflect a business “very weak” in an atomized sector with few short-term catalysts to overcome, a factor to which are added objectives that it describes as “unambitious”. With the evolution of this Wednesday, Telefónica erases all the accumulated profits for the year as a whole and already loses more than 9%. The company is one of the ones with the greatest weight within the Ibex 35so the punishment experienced drags the selective into the red with a correction of 0.61%, up to 15,900 points.