Is It Time To Buy Safaricom Shares As The Price Melts?

In the past few weeks, Safaricom’s share price has been on a free fall, causing panic among Kenyans and those who trade in forex and had invested in the company’s shares. There has been a debate as to whether it is time to buy or sell Safaricom shares.

The current share price of Safaricom Plc (SCOM) is 6.35 shillings, the lowest it has ever fallen.

SCOM closed its last trading day (Friday, March 17, 2023) at 16.35 shillings per share on the Nairobi Securities Exchange (NSE), recording a 3.8 percent drop from its previous closing price of 17.00 shillings.

The giant telco began the year with a share price of 24.15 shillings but has since lost 32.3 percent off that price valuation, ranking it 60th on the NSE in terms of year-to-date performance.

Shareholders’ worries are compounded by the fact that SCOM has lost 31 percent of the stock’s value from February 17th to date.

Safaricom is, however, the most-traded stock on the Nairobi Securities Exchange over the past three months (Dec 16, 2022 – Mar 17, 2023).

SCOM has traded a total volume of 528 million shares valued at 11 billion shillings over the period, with an average of 8.38 million traded shares per session.

A volume high of 108 million was achieved on January 19th, and a low of 153,100 on December 28th, for the same period. The table below details the last 10 trading days of activity of Safaricom on the Nairobi Securities Exchange.

But as foreign investors assume a net selling position at Safaricom, we are of the opinion that it is time for local investors to buy. This is not the first time the Safaricom share price has behaved in such a manner. It will rise to hit above 27 shillings once again.

Why?

Safaricom is the market leader and a giant at the NSE too. There is no way it is going down. Safaricom is the largest telecommunications company in Kenya, with a market share of around 60% in the mobile segment.

The company has diversified revenue streams. It has not placed all eggs in one basket. Safaricom has multiple sources of revenue, including mobile money (M-PESA), voice and data services, and enterprise solutions.

Safaricom also has a strong financial performance. The company has consistently delivered strong financial results, with revenue and net income growth over the years.

At the same time, the giant telco has a high profitability: Safaricom has a high profitability margin, with a return on equity (ROE) of around 40 percent.

When it comes to dividends, it is a darling of many investors too: The company has a track record of paying dividends to its shareholders, which can provide a reliable income stream for investors.

Related Content: 20 Reasons Why You Should Buy Safaricom PLC Shares Today