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    Telefónica (BME:TEF) Valuation Check as Major Spanish Layoffs Reshape Its Five-Year Strategy

    Simply Wall St·12/25/2025 05:29:01
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    Telefónica (BME:TEF) is back in the spotlight after agreeing a voluntary layoff plan of up to 5,500 employees in Spain, a sweeping move tied directly to its new five year restructuring strategy.

    See our latest analysis for Telefónica.

    Those restructuring headlines come on top of Telefónica’s recent quantum computing partnership and renewed value focus. Yet the share price return is still down double digits year to date, while longer term total shareholder returns remain positive. This suggests momentum has cooled, but the broader turnaround story is not broken.

    If this kind of strategic reset has you rethinking your portfolio, it could be a good moment to explore fast growing stocks with high insider ownership as potential fresh ideas beyond the big incumbents.

    With shares down this year but trading at a sizable discount to analyst targets and some intrinsic value estimates, the key question now is whether Telefónica is genuinely undervalued or if the market already anticipates its next phase of growth.

    Most Popular Narrative: 23.6% Undervalued

    With Telefónica’s fair value estimate set above the recent €3.45 close, the prevailing narrative frames today’s weakness as a potential pricing disconnect.

    The completion of large-scale portfolio optimization and monetization of non-core assets (sale of Argentina, Peru, Colombia, Uruguay, Ecuador, etc.) is reducing geographic risk and freeing up significant capital (€3 billion+). The strategy to focus on core markets (Spain, Brazil, Germany, UK) enables redeployment of resources to higher-return areas, improving free cash flow and ROCE.

    Read the complete narrative.

    Curious how shrinking headline revenues can still support a richer valuation? The narrative leans on margin rebuild, rising earnings power, and a future multiple more typical of faster growing peers. Want to see exactly how those moving parts add up to today’s fair value call?

    Result: Fair Value of $4.51 (UNDERVALUED)

    Have a read of the narrative in full and understand what's behind the forecasts.

    However, sustained high leverage or stagnation in mature core markets could quickly undermine expectations for margin recovery and improved long term earnings power.

    Find out about the key risks to this Telefónica narrative.

    Build Your Own Telefónica Narrative

    If you are not fully aligned with this view or prefer to dig into the numbers yourself, you can build a tailored thesis in minutes: Do it your way.

    A great starting point for your Telefónica research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.