Currency effects and extraordinary events are dampening the momentum of Spain and Brazil.

Telefónica shares reacted with a fall that reached 3 percent, beating market consensus estimates, but also casting some shadow due to extraordinary events in Peru or negative currency effects.

The company reported net profits through September of 989 million euros, slightly improving the forecast of analysts consulted by Finanzas.com, with total revenues of 30,417 million euros, up 2.1 percent year-on-year.

The main markets of the multinational, headed by José Maria Alvarez-Pallet, exceeded expectations, especially Brazil, Germany and Hispam, as JP Morgan analysts highlight.

Special mention deserves Spain, where Telefonica has also surprised with its growth, despite the fact that competition is very intense and operators such as Vodafone, recently acquired by Zegona, have put forward very aggressive offers.

In fact, Telefónica reported the frequency of contract terminations (shoot down(in industry jargon) is the lowest in a decade, while customer growth in Spain is at a six-year high.

Telefónica surprises with solid revenue

Particularly important was cash generation, which “stands out very positively,” up 89 percent to €866 million, analysts said. Sabadell Bank.

“Telefonica’s third quarter eases concerns about the outlook,” he said. Erhan Gürses, Bloomberg Intelligence Cash Analyst.

According to this expert, the acceleration of operations in Spain is an “encouraging” element despite increased competition, suggesting that Telefonica is managing the environment well.

In this sense, when comparing the first nine months with the same period last year, cash growth was 27 percent, well above the 10 percent predicted by Telefónica, as reported by Finanzas.com. Juan PenaGVC Gaesco analyst.

Doubts that worry Telefonica investors

However, investors decided to take profits due to two negative catalysts that the market did not ignore: the 314 million euros of reserves that Telefónica provided in Peru and the impact of currencies, as Pena explained.

“A situation has been noticed again in Hispam that the market does not like at all, because it seems that it never stops providing numbers, and there is also a currency effect, in the end people are a little afraid that it continues to influence,” Peña emphasized.

Regarding the impact of the exchange rate, Peña recalled that the results presented by Telefónica Brasil a couple of days ago were “very good”, with revenue and EBITDA growth of around 7 percent.

The problem is that this Thursday the market saw that these Brazilian figures, translated into euros, remained at 6-7 percent.

“It’s about the uncertainty around currency, the fact that no matter how well you do in the local market, you can’t take it out into a consolidated account,” Peña said.

Collection of benefits

With all these derivatives on the table, investors weighed the positives and negatives to ultimately make a sell-off bet, especially since Telefonica shares have already been overvalued by more than 20 percent this year.

Thus, the target for further growth of the shares is “too high due to the good results accumulated over the year,” he recalled. Navar ChristiniMorgan Stanley analyst.

In this sense, Pena, who has one of the highest valuations among the entire consensus (5 euros per share), noted that Telefónica does not have many catalysts to move beyond these levels.

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