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Vodafone stock target cut by BofA Securities, retains buy rating

EditorAhmed Abdulazez Abdulkadir
Published 04/04/2024, 06:58 AM

On Thursday, BofA Securities adjusted its price target for Vodafone Group Plc (LON:VOD:LN) (NASDAQ: VOD), reducing it to £1.13 from the previous £1.20 while still recommending the stock as a Buy. The adjustment reflects a period of transition for the telecommunications giant as it navigates through a series of significant portfolio deals.

Vodafone (NASDAQ:VOD) has recently announced three major portfolio transactions intended to significantly alter the company's earnings outlook. However, these deals are not yet finalized. The sales in Spain and Italy are expected to proceed with relative security, but the merger with UK Hutch is subject to a more extended regulatory review process. The uncertainty of this merger's completion has left earnings forecasts in a state of flux, with only the Spanish operations anticipated to be omitted from the fiscal year 2025 outlook.

BofA Securities presented a pro forma model that accounts for the anticipated impact of all three transactions. According to this model, even with the peak cash flow dilution expected in fiscal year 2026, Vodafone is projected to offer a cash flow yield of over 7%. Moreover, a strong recovery is forecasted, with cash flow potentially doubling by fiscal year 2030.

The firm also highlighted Vodafone's new dividend and buyback policy, which seems to signal the final stage of its strategy. With a 6% rebased dividend yield and a €4 billion share buyback program set to take place over the next two years, the company aims to provide incentives for investors to remain patient during this transitionary period. Despite the lowered price target, BofA Securities reaffirms its confidence in Vodafone with a continued Buy rating on the stock.

InvestingPro Insights

In light of Vodafone Group Plc's (VOD:LN) (NASDAQ: VOD) ongoing strategic transitions and portfolio deals, current market metrics from InvestingPro provide additional context for investors. Vodafone is trading at a low Price / Book multiple of 0.37, suggesting that the stock may be undervalued relative to its book value. Furthermore, the company's P/E Ratio stands at a modest 2.16, indicating it may also be trading at a low earnings multiple compared to industry peers.

InvestingPro Tips highlight that Vodafone is not only a prominent player in the Wireless Telecommunication Services industry but also pays a significant dividend to shareholders, boasting a high dividend yield of 10.37%. This is in line with the company's history of maintaining dividend payments for 35 consecutive years. For investors seeking additional insights and tips, there are more available on InvestingPro, including the prediction that Vodafone will be profitable this year and has been profitable over the last twelve months.

For those considering a deeper investment analysis, using the coupon code PRONEWS24 can provide an additional 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro. There, subscribers can access a broader range of InvestingPro Tips, with 5 additional tips currently listed for Vodafone that could further inform investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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