Goldman upgrades Vodafone to ‘buy’, hikes price target

The bank, which hiked its price target to 155p from 85p, said Vodafone’s return on invested capital is now accelerating, driven by UK mobile market repair and increased cost-cutting.

"This can drive a re-rating amplified by leverage; our estimates are above consensus for the first time in years," it said.

"Vodafone’s structural quality remains at the lower end of the sector, primarily given a weaker Germany market structure and historical execution," Goldman said. "However, we model growth accelerating from here, raising our estimates to reflect expectations: UK market repair will begin to boost growth from CY27; Vodafone will increase its focus on cost efficiencies; growth in Africa is sustainable."

GS said these organic improvements mean its estimates are now above group consensus and no longer below on Europe, for the first time in several years. They also mean that Vodafone’s relative ROIC improvement over the next three years is above the sector average.

"The equity upside from the resulting rerating will likely be amplified given its low EV/IC starting multiple and relatively high leverage," it said. "We also see increasing upside potential from German mobile market consolidation."

At 0917 BST, the shares were up 1.7% at 124.34p.