Vodafone PLC’s (LON:VOD) third quarter service revenue met market forecasts but the prospects for sustained and accelerated earnings growth are intact, Numis said in a note to investors.
Numis raised its rating on the stock to ‘buy’ from ‘add’ and left its target price at 270p. Last week, the company reported a 1.1% rise in third quarter organic service revenue, compared to 1.3% growth the previous quarter, as it tackled new mobile roaming regulations in Europe and a shift towards SIM-only contracts.
READ: Vodafone's quarterly revenue drops on impact of Dutch unit sale and forex
Too soon to think Vodafone will spend more cash in India
The struggling India division continued to contend with price competition but Numis thinks it is too early to believe Vodafone will have to inject more cash into the business.
In March 2017, the company announced a deal to combine its Vodafone India subsidiary with Idea Cellular. Vodafone and Idea recently agreed on an extra cash injection of up to €1.8bn, raised €1bn from selling standalone towers and will raise €1bn from selling an 11% stake in Indus Towers.
Numis pleased Vodafone not exiting UK
Vodafone is also in early talks to buy some of Liberty Global's assets in the continental European countries where they both operate.
The news comes two years after discussions between the pair collapsed.
“Buying Liberty out of Germany would double Vodafone’s cable footprint to c.60% of the country,” Numis analyst John Karidis.
“Because of this, cable's long and enduring value, and the total worth of Germany's market, we doubt investors will begrudge VOD if it pays a full multiple (11-12x EBITDA).”
Numis added that it was glad Vodafone is not exiting the UK as this “could hurt its global Enterprise business”.
Shares in Vodafone fell 2.3% to 214.3p in morning trading.