Safaricom’s stock has recently experienced bullish activity, briefly crossing a market capitalization of one trillion shillings. According to the company’s CFO Dilip Pal, the surge in investor confidence is attributed to several key factors, ranging from strategic execution to transparent engagement and improved market conditions.
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Key Drivers:
- •Successful Execution of the 2020- 2025 Strategy: Safaricom’s previously concluded five-year strategy (FY2025) focused on listening to customers, solving their issues, innovating, and providing new services and products with the purpose of transforming lives. The company’s financial results for the last financial year evidenced the successful execution of this strategy, reflected in customer growth across all segments and achieving the best customer Key Performance Indicators (KPIs) seen in the last four to five years.
- •Approval and Transparency of the New FY26-30 Strategy: Investors have gained confidence from the approval and detailed presentation of Safaricom’s next five-year strategy, spanning FY26 to FY30. This new strategy aims for Safaricom to become “Africa’s leading purpose-led technology company,” signaling a future with more solutions-driven topline. The company provided market guidance for FY26 as the first year of this new strategy, further building trust among investors and analysts.
- •Positive Commercial Execution in Ethiopia: A major concern for investors in 2022 was the capital expenditure and spending directed towards the Ethiopian market. However, there is now more confidence around Ethiopia’s commercial execution, with the company doubling its customer base and most Ethiopian KPIs performing better than expected. The medium-term outlook for customer acceleration, site numbers, and population coverage with a strong mobile data network is also “coming to life”.
- •Improved Macroeconomic Environment: Investors closely monitor macroeconomic conditions. Safaricom’s management has conveyed an improving macro environment in both Kenya and Ethiopia. In Ethiopia, inflation has improved significantly from over 30% to 13-14%, and a bold step was taken with market-based currency reforms. In Kenya, while the currency experienced some volatility, it has since been stable, which foreign investors particularly rely on.
- •Management’s Ability to Execute: A critical factor for investors is their belief in the management’s capability to execute. Investors are “putting their money” believing in this ability and will hold the company accountable for execution, especially regarding the momentum in Ethiopia and meeting guided targets. The Kenyan side of the business is seen as more resilient and well-delivered, particularly in connectivity, fixed services, and M-Pesa, which has shown encouraging growth over the last 15 years.
- •Undervalued Stock (Analyst Consensus): Even when Safaricom’s share price was low, the consensus price from analysts and investment banks was consistently much higher, indicating that they viewed the stock as undervalued.
