Vodafone shares set to soar, says Deutsche Bank ahead of Q1 earnings

Despite Vodafone facing a myriad of challenges, analysts at Deutsche Bank remain optimistic about the telecoms provider’s share price trajectory ahead of its first quarter (Q1) earnings on Friday 24 July.

Earlier this month, analysts at the German lender reiterated their ‘buy’ rating for Vodafone and issued a target price of 225p per share for the stock – implying a potential upside of 73%.

Vodafone is trading at 130p per share at the time of publication which is the level it closed at on Friday last week, with the stock 11% down year-to-date.

UBS and Morgan Stanley likely to lead Vodafone Tower IPO

UBS and Morgan Stanley were reported to be handling the company’s European Tower IPO, according to Reuters.

The deal, which is valued at approximately €16 billion (£14.6 billion), saw both investment banks and US-based Goldman Sachs pitch to become joint global coordinators in the listing, which is expected to get underway in the first quarter (Q1) 2021, according to Reuters sources.

The Tower IPO listing is expected to take place on the Frankfurt Stock Exchange.

Vodafone announced its plan to carve out its mobile mast in Europe last year, with telecoms provider looking to list a minority stake in its towers unit.

Signs of Vodafone’s Tower IPO progressing is promising for capital markets that have had to endure a relative drought this year, with European IPOs raising just $5.6 billion in H1 2020 – the lowest level since 2012, according to data compiled by Refinitiv.

Vodafone Q1 results and its full-year 2021 guidance

Vodafone has endured challenging market conditions over the last two years which has seen the company taken on more debt and underperformance across the group forced it to cut its dividend in 2019.

However, in its full-year results in May stronger performances from its South Africa, Italy and Spain divisions allowed it to raise its guidance in 2020. Looking ahead to the 2021 financial year, Vodafone expects free cash flow to be at least €5 billion.

But the telecoms provider admitted that due to the economic impact of Covid-19 and the wider macroeconomic landscape its adjusted EBITDA for FY21 will likely be flat to slightly down compared to a rebased FY20 baseline of €14.5 billion.

‘The economic impact of the Covid-19 pandemic in our markets, whilst uncertain, is likely to be significant,’ Vodafone said in its full-year 2020 results. ‘Whilst our business model is more resilient than many others, we are not immune to the challenges.’

‘We are experiencing a direct impact on our roaming revenues from lower international travel and we also expect economic pressures to impact our customer revenues over time,’ the company added. ‘However, we are also seeing significant increases in data volumes and further improvements in loyalty, as our customers place greater value on the quality, speed and reliability of our networks.’

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