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Investing.com - Goldman Sachs downgraded Vodafone (NASDAQ:VOD) from Neutral to Sell on Thursday, while lowering its price target to GBP0.75 from GBP0.80. The telecom giant, currently trading at $11.06 with a market cap of $26.3 billion, has shown strong momentum with a 33% year-to-date return according to InvestingPro data.
The investment bank cited reduced confidence in Vodafone’s organic growth and returns outlook, along with limited mobile consolidation upside potential as key factors behind the downgrade. InvestingPro analysis reveals the company maintains a "GOOD" overall financial health score, with particularly strong ratings in price momentum and relative value metrics. Notably, Vodafone has maintained dividend payments for 37 consecutive years.
Goldman Sachs noted that Vodafone’s growth and returns outlook appears weak with limited scope for near-term improvement, projecting the company’s ROIC (Return on Invested Capital) to rise just 0.7 percentage points from FY25-30 to 6.6%, which it considers uncompelling compared to the sector average increase of 2.5 percentage points.
The bank identified Germany, which represents approximately 40% of Vodafone’s Group proportionate EBITDA, as the key problematic area, forecasting a broadly flat German EBITDA CAGR across FY25-30.
This performance trails behind German peers and the wider telecommunications sector, which Goldman Sachs expects to grow at 3% and 4% respectively during the same period.
In other recent news, Vodafone and Three UK have finalized their merger, creating the largest mobile operator in the UK, known as VodafoneThree. This newly formed entity is 51% owned by Vodafone and 49% by CK Hutchison, the parent company of Three. Max Taylor, currently heading Vodafone UK, will lead the combined business. Additionally, Berenberg has reinstated its coverage on Vodafone Group (LON:VOD) with a hold rating and set a price target of GBP0.80. The research firm expressed concerns over Vodafone’s complex group structure, despite its recent asset sales in Spain and Italy. Berenberg also highlighted the underperformance of Vodafone’s largest asset, its German business, over several quarters. These developments indicate significant changes in Vodafone’s operational landscape.
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