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Vodafone share price: Credit Suisse points to near-term challenges

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Credit Suisse has lowered its price target on Vodafone (LON:VOD), citing recent foreign exchange changes and commentary from a management presentation, leading to lower forecasts for headline earnings and free cash flow, Proactive Investors reports. The news comes after it emerged that the blue-chip telco’s incoming chief executive Nick Read is considering a sale of tens of thousands of mobile masts in an effort to reduce the group’s debt pile.

Vodafone’s share price rose marginally in the previous session, adding 0.38 percent to 168.08p. The stock outperformed the broader UK market, with the benchmark FTSE 100 index giving up 1.94 points to close 0.03 percent lower at 7,302.10, pressured by the prospects of fresh US tariffs on China.

Credit Suisse trims targets on telco

Credit Suisse lowered its price target on Vodafone by 10p to 225p yesterday, while retaining its ‘outperform’ rating on the shares. Proactive Investors quoted the analysts as pointing to some near-term challenges for the telecoms giant, namely softer growth in the second quarter, uncertainties around the Liberty deal closing, and balance sheet pressure.

Analysts expect outlook to improve

The broker, however, expects that next year will see better trading for the telecoms giant.

“Taking a slightly longer term view we expect the outlook for the stock to improve and see the recent weakness as providing a more attractive entry point,” Credit Suisse pointed out, adding that they saw Vodafone’s recovery driven by service revenue growth inflecting and returning to modest growth in FY19, digitisation and synergy realisation to drive margin expansion, as well as improving visibility on spectrum costs.

The comments come after earlier this month, Citi turned bullish on Vodafone, arguing that while the telco’s dividend was at risk of being cut, it still reckoned that the company was ‘worth a trade’.

As of 08:04 BST, Tuesday, 18 September, Vodafone Group plc share price is 168.08p.

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