| CATEGORY: BROKER RECOMMENDATIONS SECTOR: MOBILE TELECOMMUNICATIONS |
Broker snap: Vodafone losing market share |
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Tue 14 Jul 2009
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LONDON (SHARECAST) - Vodafone is losing share in three of its four main European markets according to UBS, which has downgraded its rating of the mobile phone giant.
The Swiss bank believes the stock is a short-term sell and has switched its medium-term recommendation to “neutral” from “buy” while cutting its price target from 150p to 115p.
“Economic pressures, market share loss and foreign exchange have combined to put pressure on our earnings estimates for Vodafone. Excluding last year's tax gain, we expect earnings to decline 11% this year. We think the upcoming KPIs [key performance indicators] are likely to show deterioration across the board, with the European businesses seeing a revenue decline of 5.5%,” UBS said.
The bank believes that reversing the loss of market share will either require price cuts or increased promotional expenditure, with the latter flying in the face of management’s stated aim of reducing the cost base.
US bank Morgan Stanley remains “overweight” in the shares but has trimmed its price target from 175p to 170p ahead of the company’s first quarter interim statement on 24 July.
“In our view the key question will be whether the trend for worsening year-on-year revenue trends in Europe will be continued into the second quarter. We believe that there is a reasonable chance that the first quarter forms the low point of the current decline, or at least that the second quarter records a figure comparable to the first, with less negative quarters ahead,” Morgan Stanley said.
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