Ahead of full year figures later this month, Vodafone is in demand after a series of upgrades.
The mobile operator is up 3.9p to 232.45p on hopes for an improvement in its UK business after its Project Spring programme to increase investment by some £6bn.
Exane BNP Paribas moved from neutral to outperform and raised its price target from 220p to 270p, saying:
Project Spring has felt like a long cold winter for Vodafone shareholders – there are much better times ahead in our view.
The combination of a dramatically improved proposition (both absolute and relative), the secular trend of increased data consumption and the benefits of an improving market structure (and hence data monetisation) should see a return to revenue and EBITDA growth on an underlying basis in 2016 (and on a reported basis the following year). The normalisation of capex will see a step change in free cash flow, restoration of dividend cover and improved shareholder returns.
Exane also suggested that, rather than Vodafone buying Liberty Global as had been suggested in some quarters, the opposite might happen:
Vodafone is seen as a perennial buyer of cable assets with a value destructive bid for Liberty Global seen as inevitable in some parts. A Liberty bid for Vodafone would seem more likely in our view.
Deutsche Bank issued a buy note, saying:
The fourth quarter is likely to see Vodafone back to group organic service revenue growth for the first time in almost three years. This is important and marks a ‘more gentle era’ of less price pressure, lower regulatory drag, and recovering economies which should allow the secular, mobile data story to flourish.
Vodafone is also making progress in fixed and with [recent acquisition] Kabel Deutscheand included in organics from the first quarter, will no longer be viewed as a shrinking asset. Whilst capex remains ‘highly sprung’ in 2016, growth will increase confidence in a covered dividend by 2017 (around 5% yield). Foreign exchange unfortunately remains a near-term drag on our estimates.
Jefferies was less positive, with a hold recommendation, although it raised its target price from 218p to 226p.
