Telefonica (TEF) AI Stock Analysis

• Market Cap: €20.66B
• Dividend Yield: 7.88%
• Average Volume (3M): 7.73M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.63
• Revenue Growth: -7.15%
• EPS Growth: -79.58%
• Country: ES
• Employees: 100,870
• Sector: Communication Services
• Sector Strength: 97
• Industry: Telecommunications Services
• EPS (TTM): 0.09
• Shares Outstanding: 5,670,161,600
• 10 Day Avg. Volume: 9,593,306
• 30 Day Avg. Volume: 7,727,065
• PEG Ratio: 6.31
• Price to Book (P/B): 1.15
• Price to Sales (P/S): 0.54
• P/FCF Ratio: 4.27
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: €3.64
• Price Target Upside: -0.55% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 9
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 49 Neutral
• Price Target: €3.00 ▼(-18.03% Downside)

Telefonica's overall stock score is primarily impacted by its financial performance challenges, including declining revenue growth and profitability pressures. The technical analysis indicates a bearish trend, further weighing on the score. Despite these challenges, the high dividend yield offers some support to the valuation score.

Positive Factors

Diversified Revenue Streams

Telefonica’s mix of mobile, fixed broadband, pay-TV and growing digital services across Europe and Latin America provides durable recurring revenue and cross-sell opportunities. This diversification supports resilience to regional demand swings and funds continued network and digital investments over time.

Strong Operating Cash Generation

Robust operating cash flow despite accounting net losses indicates underlying cash-generation capacity. This durability supports capex for networks, dividend distributions and debt servicing, giving management flexibility to invest in 5G, fiber and digital transformation without immediate reliance on external funding.

Improving Leverage Management

An improved, moderate debt-to-equity position reduces refinancing and liquidity risk and increases strategic optionality. Better leverage management enhances credit stability and lowers interest burden, enabling longer-term investments and capacity to withstand cyclical telecom capex demands.

Negative Factors

Declining Revenue and Profitability

Sustained revenue declines and negative net income erode operating scale and reduce funds available for reinvestment. Over months this can pressure service quality, slow rollout of strategic upgrades and weaken competitive positioning versus peers investing more aggressively in networks and digital offerings.

Weak Top-line and EPS Trends

A sharp EPS decline alongside negative revenue growth signals structural pressures on margins or pricing power. Persisting EPS erosion restricts ability to sustain dividends, hire talent or invest in growth initiatives, and may require cost restructuring that could impair long-term competitiveness.

Declining Free Cash Flow Growth

Even with healthy FCF-to-net-income ratios, weakening free cash flow growth reduces available capital for network expansion, spectrum acquisitions and digital investments. Over the medium term this can slow modernization efforts and limit the company’s ability to accelerate revenue recovery or deleverage further.

Telefonica Business Overview & Revenue Model

Company Description

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.

How the Company Makes Money

Telefonica generates revenue primarily through its core telecommunications services, including mobile and fixed-line voice services, broadband internet, and pay television subscriptions. The company's revenue model is diversified across several key streams: mobile service revenue, which includes voice, SMS, and data services; fixed-line services, comprising broadband and traditional telephony; and digital services, such as cloud computing and cybersecurity solutions. Additionally, Telefonica has established strategic partnerships with technology firms and content providers, enhancing its service offerings and creating additional revenue opportunities. The company also benefits from economies of scale and a broad customer base, which contribute to its financial stability.

Telefonica Financial Statement Overview

Summary

Telefonica faces challenges with declining revenue growth and profitability pressures, as reflected in the negative net income and decreasing free cash flow. While leverage has improved, the company needs to address its profitability issues to enhance financial stability. The cash flow remains a relative strength, supporting operations despite income challenges.

Income Statement

Telefonica's income statement shows declining revenue growth with a negative trend in net profit margin, indicating profitability challenges. The gross profit margin remains strong, but the negative net income in the TTM period is concerning. EBIT and EBITDA margins are stable, but overall profitability is under pressure.

Balance Sheet

The balance sheet reflects a moderate debt-to-equity ratio, which has improved from previous years, indicating better leverage management. However, the return on equity is negative, highlighting inefficiencies in generating returns from equity. The equity ratio is stable, suggesting a balanced asset structure.

Cash Flow

Cash flow analysis shows a decline in free cash flow growth, but operating cash flow remains robust relative to net income. The free cash flow to net income ratio is healthy, indicating good cash generation despite net losses. However, the negative growth in free cash flow is a concern.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	38.27B	41.31B	40.65B	39.99B	39.28B	43.08B
Gross Profit	32.04B	28.76B	20.23B	27.05B	27.02B	30.06B
EBITDA	14.30B	12.35B	10.34B	14.79B	22.53B	13.82B
Net Income	-2.12B	-49.00M	-892.00M	2.01B	8.14B	1.58B
Balance Sheet
Total Assets	92.57B	100.50B	104.32B	109.64B	109.21B	105.05B
Cash, Cash Equivalents and Short-Term Investments	4.39B	9.26B	7.67B	9.69B	12.41B	8.10B
Total Debt	42.90B	45.02B	44.35B	8.68B	50.37B	50.85B
Total Liabilities	71.22B	77.75B	77.23B	77.93B	80.53B	86.79B
Stockholders Equity	17.61B	19.35B	14.30B	25.09B	22.21B	11.23B
Cash Flow
Free Cash Flow	4.76B	5.20B	5.49B	5.30B	4.10B	6.18B
Operating Cash Flow	10.76B	10.99B	11.65B	10.81B	10.27B	13.20B
Investing Cash Flow	-5.64B	-5.22B	-4.29B	-5.33B	5.90B	-7.79B
Financing Cash Flow	-7.02B	-4.67B	-7.19B	-7.92B	-12.99B	-5.44B

Telefonica Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 3.66
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ES:TEF, the sentiment is Positive. The current price of 3.66 is above the 20-day moving average (MA) of 3.39, above the 50-day MA of 3.46, and below the 200-day MA of 4.08, indicating a neutral trend. The MACD of <0.01 indicates Negative momentum. The RSI at 69.23 is Neutral, neither overbought nor oversold. The STOCH value of 98.65 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ES:TEF.

Telefonica Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
TEF	49 Neutral	€20.66B	-9.91	-0.90%	7.88%	-7.15%	-79.58%