In reaction, in mid morning trading, the FTSE 100-listed firm’s shares were 0.9%, or 2.0p higher at 223.05p.
The Deutsche analysts noted that the mobile telecom provider’s guidance for underlying earnings (EBITDA) growth and the fact its free cashflow is well above the dividend has gone down well with investors, with Vodafone shares up 9% since the results release on May 16.
Although they noted that the group’s organic service revenue (OSR) growth will reverse in the second quarter due to the roaming charge changes in Europe, they think that headline OSR growth will start to catch up with underlying from the third quarter.
The analysts think OSR could potentially be super-charged then by a recovery in handset sales - with a new model launch scheduled by Apple Inc (NASDAQ:AAPL) - while operating leverage for mobile service revenue growth should improve further as Europe moves back into positive territory.
They also concluded that Vodafone’s dividend yield of 5.9% should re-rate if the group’s top line and margins improve under a stable capex outlook.
Meanwhile, Berenberg more modestly increased its price target for Vodafone to 259p from 250p in a pretty cautious review of the UK telecoms and broadband sector.
The German broker also maintained its ‘buy’ rating on Vodafone which remains its favoured UK telco.