BofA Sees Growth Acceleration Ahead At Vodafone, Upgrades To Buy

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Shares of Vodafone Group Plc (ADR) VOD are up 10 percent year-to-date. BofA Merrill Lynch’s David Wright upgraded the rating for the company from Neutral to Buy, while raising the price objective from $247 to $260.

Reinvestments To Yield Results

Vodafone has taken several steps to reposition itself and the benefits of the same are expected to be visible over the next 12-18 months in the form of organic growth, analyst David Wright said. The company’s ongoing cost efficiency measures are also likely to boost performance in the near future.

Vodafone’s Project Spring has made the company competitive again, as evident in reduced churn and improving revenues. Wright added further, “Cable integration also looks to be establishing a more convergent product set, albeit limited by coverage.”

Vodafone’s quarterly growth is expected to accelerate through FY17, with full-year organic EBITDA growth of 4 percent. “Cash flow upside is less obvious though and Net Debt looks under forecast for spectrum. However, this could represent the last material outlay for some time, providing long awaited dividend cover in FY March 18,” the analyst wrote.

“Crucially, VOD's dividend is nearing the end of a five year uncovered cycle as a supportive driver at 5% yield,” the BofA Merrill Lynch report stated.

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Posted In: Analyst ColorLong IdeasUpgradesPrice TargetAnalyst RatingsTrading IdeasBofA Merrill LynchDavid Wright
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