As of June 21, 2025, Telefonica SA has a Discounted Cash Flow (DCF) derived fair value of $2.97 per share. With the current market price at $4.54, this represents a potential upside of -34.7%.
| Key Metrics | Value |
|---|---|
| DCF Fair Value (5-year) | $3.17 |
| DCF Fair Value (10-year) | $2.97 |
| Potential Upside (5-year) | -30.1% |
| Potential Upside (10-year) | -34.7% |
| Discount Rate (WACC) | 4.7% - 6.5% |
Revenue is projected to grow from $41315 million in 12-2024 to $53917 million by 12-2034, representing a compound annual growth rate of approximately 2.7%.
| Fiscal Year | Revenue (USD millions) | Growth |
|---|---|---|
| 12-2024 | 41315 | 2% |
| 12-2025 | 37571 | -9% |
| 12-2026 | 38322 | 2% |
| 12-2027 | 39465 | 3% |
| 12-2028 | 41524 | 5% |
| 12-2029 | 44053 | 6% |
| 12-2030 | 44934 | 2% |
| 12-2031 | 45833 | 2% |
| 12-2032 | 48053 | 5% |
| 12-2033 | 50686 | 5% |
| 12-2034 | 53917 | 6% |
Net profit margin is expected to improve from 1% in 12-2024 to 1% by 12-2034, driven by operational efficiency and economies of scale.
| Fiscal Year | Net Profit (USD millions) | Profit Margin |
|---|---|---|
| 12-2024 | 209 | 1% |
| 12-2025 | 384 | 1% |
| 12-2026 | 391 | 1% |
| 12-2027 | 403 | 1% |
| 12-2028 | 424 | 1% |
| 12-2029 | 450 | 1% |
| 12-2030 | 459 | 1% |
| 12-2031 | 468 | 1% |
| 12-2032 | 491 | 1% |
| 12-2033 | 518 | 1% |
| 12-2034 | 551 | 1% |
with a 5-year average of $6013 million. Projected CapEx is expected to maintain at approximately 15% of revenue.
Depreciation is based on an average useful life of 5 years for capital assets.
| Fiscal Year | D&A (USD millions) |
|---|---|
| 12-2025 | 5714 |
| 12-2026 | 5608 |
| 12-2027 | 5667 |
| 12-2028 | 5718 |
| 12-2029 | 5909 |
| 12-2030 | 6126 |
Net working capital is expected to increase gradually, with projected changes affecting free cash flow.
| Components | Average Days |
|---|---|
| Days Receivables | 63 |
| Days Inventory | 20 |
| Days Payables | 141 |
| Fiscal Year | EBITDA | Tax | CapEx | Change in NWC | FCF |
|---|---|---|---|---|---|
| 9M/2025 | 5720 | 92 | 4143 | 391 | 1093 |
| 2026 | 7558 | 125 | 5635 | (194) | 1993 |
| 2027 | 7676 | 129 | 5803 | (36) | 1779 |
| 2028 | 7831 | 136 | 6106 | 99 | 1491 |
| 2029 | 8151 | 144 | 6478 | (48) | 1578 |
| Valuation Method | Fair Price (USD) | Potential Upside |
|---|---|---|
| 5-Year DCF (Growth) | 3.17 | -30.1% |
| 10-Year DCF (Growth) | 2.97 | -34.7% |
| 5-Year DCF (EBITDA) | 0.00 | -100.0% |
| 10-Year DCF (EBITDA) | 0.00 | -100.0% |
Is Telefonica SA (TEF.MC) a buy or a sell? Telefonica SA is definitely a sell. Based on our DCF analysis, Telefonica SA (TEF.MC) appears to be overvalued with upside potential of -34.7%. The company's strong projected growth in revenue and profitability, coupled with consistent capital expenditure, supports our positive outlook on its intrinsic value.
Key investment drivers include:
Investors should consider reducing exposure at the current market price of $4.54.