Bernstein has lifted its rating on Vodafone (LON:VOD), arguing that the telco’s asset swap with Liberty Global would provide improved operating cash flow and boost dividend cash cover, the Financial Times reports. Earlier this year, the London-listed company agreed to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania for an enterprise value of €18.4 billion.
Vodafone’s share price has fallen into the red in today’s session, having given up 0.68 percent to 163.18p as of 14:37 BST. The stock is marginally outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.95 percent lower at 7,387.14 points. The group’s shares have lost just under a quarter of their value over the past year, as compared with about a 0.2-percent gain in the Footsie.
Bernstein weighs in on Vodafone
Bernstein lifted its rating on Vodafone from ‘neutral’ to ‘outperform’ today, with a price target of 230p on the shares.
“Vodafone’s share price is down 30 per cent from its 240p peak in April 2018. Current trading multiples and a circa eight percent dividend yield suggest the market is pricing in a dividend cut,” the analysts pointed out, as quoted by the FT. “But is it looking at the right company, given the deal with Liberty?”
The broker argues that the London-listed telecoms giant would “soon cease to exist in its current form” with the asset swap with Liberty Global set to provide improved operating cash flow from an attractive German market and boost dividend cash cover.
Other analysts on FTSE 100 telco
UBS, which sees Vodafone as a ‘buy,’ set a price target on the shares of 250p last week. According to MarketBeat, the blue-chip company currently has a consensus ‘buy’ rating and an average price target of 236.71p.