Telecommunications company Veon (NASDAQ:VEON) stock has been hurt by Russia’s invasion of Ukraine. From a 52-week high of $2.38, VEON stock slumped to 24 cents in early March 2022.
However, the penny stock made a big comeback with a rally of 154% to current levels of nearly 60 cents. It seems the worst is over for VEON stock, and investors can expect further upside.
Last month, Fitch and S&P downgraded the company’s credit rating to junk status. However, its rating was still few notches higher than Russia’s sovereign rating. One reason for this is Veon’s strong geographic diversification with a presence in nine countries. Further, it has a robust liquidity profile with a cash buffer of $2.3 billion.
Financial flexibility will allow Veon to focus on other countries and accelerate growth that offsets geopolitical headwinds. Recently, the company announced the doubling of its spectrum holding in Bangladesh, which is a high-growth economy.
A day after the rating downgrade, the company’s CEO Kaan Terzioglu shared a letter with investors. Terzioglu claims that Veon is not “subject of any sanctions imposed by the European Union, the United States or the United Kingdom.”
Of course, revenue and EBITDA from Ukraine will be impacted. However, the sharp correction in the stock has discounted these factors.
In 2021, Veon incurred capital expenditure of $1.8 billion. Even after this, the company reported free cash flow of $421 million. Positive free cash flow might be unlikely in 2022. However, the business has potential to deliver healthy EBITDA and cash flows. Veon would be positioned to deleverage as geopolitical worries de-escalate in the next few years.
Overall, VEON stock has been in the thick of it in the recent past. The big slump was followed by a sharp rally, which is likely to sustain as investor nerves calm. It would be a good idea to add VEON stock to a portfolio of hot penny stocks for 2022. I would not be surprised if it doubles from current levels in the next six to 12 months.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.