Kepler has started coverage of Vodafone (LON:VOD) with a ‘reduce’ recommendation, flagging concerns over the telco’s ability to sustain its generous dividend, Proactive Investors reports. The comments come ahead of the FTSE 100 group’s trading update on July 25, to be followed by the company’s annual general meeting on July 27.
Vodafone’s share price has slipped marginally into the red in today’s session, having given up 0.24 percent to 182.70p as of 09:29 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.46 percent higher at 7,626.88 points. The group’s shares have given up more than 17 percent to their value over the past year, as compared with about a 2.8-percent gain in the Footsie.
Kepler rates Vodafone as ‘reduce’
Kepler started coverage of Vodafone with a ‘reduce’ rating today, valuing the telco’s shares at 180p. Proactive Investors quoted the analysts as arguing that the group had several spectrum auctions coming up, which will delay it on the path to free cash flow growth, leaving the dividend uncovered.
“With c. 75 percent of total service revenues coming from mobile, Vodafone remains a predominantly mobile carrier,” the broker pointed out, adding that while the case for data growth was evident, the case for data monetisation was not.
Earlier this year, Vodafone acquired 50 MHz of spectrum in the 3400 MHz band for mobile data services in industry regulator Ofcom’s auction for £378.2 million.
Other analysts on blue-chip telco
Barclays, which sees Vodafone as ‘overweight,’ lowered its price target on the shares from 260p to 250p today. According to MarketBeat, the telecoms giant currently has a consensus ‘buy’ rating and an average price target of 240.20p.