Vodafone Group PLC (LON:VOD) has been upgraded to ‘Buy’ from ‘Neutral’ by analysts at Bank of America Merrill Lynch as they expected a return to top-line growth after an “annus horribilis” for the FTSE 100 firm.
In a note, the bank said the last 12 months had been “generally torrid” for the mobile network operator, with “Southern European decline, currency depreciation, high spectrum costs, and Indian funding”.
READ: Vodafone expects 2019 earnings to drop as new accounting measures dent revenues
However, BoA said these headwinds were now passing as well as being “increasingly baked into forecasts”, and as such growth was predicted to return, albeit marginally.
Dividend over-distribution remained a “sore point” for the firm, analysts said, a; though they believed there was potential for a revisit and cut as a pending £16.1bn deal with US firm Liberty Global to buy cable networks in Germany and eastern Europe would “add leverage and a possible credit downgrade, but also double-digit earnings and cash flow per share increases”.
The bank added that a possible sale of Vodafone’s stake in Dutch cable operator Ziggo and network sharing deals could also be “potentially positive catalysts”.
“In a similar vein to BT's outperformance through 2018, we think VOD should benefit from easing headwinds, and a return to growth. And thus, with our more cautious view of BT's Consumer prospects into 2019/20E, we highlight VOD's contrasting growth profile, with scope for potential M&A-based upgrades”.
In mid-morning trading Wednesday, Vodafone shares were up 1.3% at 142.9p.