Vodafone and Rightmove to dominate on Friday

Fridays can sometimes be quiet affairs in the Square Mile, but there’s a handful of things for investors to feast on this week

Vodafone looks “too cheap” at the moment, says UBS

Ending the week will be a much anticipated trading update from Vodafone Group Plc (LON:VOD), fresh from receiving the green light for its massive acquisition of European cable assets from Liberty Global and not long after its dramatic dividend cut.

Since the start of last year, shares in the UK mobile telecoms titan have lost more than 44% as investors fretted about the dividend amid lacklustre sales growth due to troubles in Italy, Spain, South Africa and India, together with expensive mobile spectrum auctions and a €27bn debt pile.

Seeing value in the shares, analysts at several major banks have been pushing out bullish notes, with Barclays seeing “a clear value opportunity” and saying Friday’s update could be a catalysts to help “unlock the discount” to its punchy 200p price target if there is “hopefully no operational deterioration” in the first quarter of Vodafone’s financial year.

Berenberg sees “attractive” risk/reward ratio in the stock, eyeing a “virtuous circle of improving revenue trend and faster deleveraging to drive a re-rating of the equity and restore confidence in the rebased dividend”, though they don’t expect services revenues to return to growth until the third quarter of the financial year.

UBS expects the first quarter to see an improvement in Italy, weaker South Africa, Spain softer but close to bottoming out, while the UK and Germany see broadly similar trends to the prior quarter.

“While Q1 trends themselves may not be a notable catalyst, we see Vodafone as too cheap,” the Swiss bank said.

Rightmove tackles housing market slowdown

Property website Rightmove PLC (LON:RMW) has been grappling with a slowdown in the housing market but is still expected to post stronger revenue for the first half.

UBS estimates revenue of £142mln for the first six months of fiscal year 2019, up 8% on the previous year, with average revenue per agent up 8.8% to £1,073. The investment bank predicts a 9.7% rise in diluted earnings per share to 9.5p. 

However, the number of advertisers are expected to fall by 1% to 20,252 as homeowners delay selling amid Brexit uncertainty.

Looking ahead, UBS thinks Rightmove might struggle to accelerate ARPA growth in line with market forecast of 7-8% per year for 2018-28 given the weakness in the UK housing market.

Significant events expected on Friday July 26:  

Trading updates: Vodafone PLC (LON:VOD)

Interims: Greencoat UK Wind PLC (LON:UKW), Rightmove PLC (LON:RMV), IMI PLC (LON:IMI)

AGMs: Chaarat Gold PLC (LON:CGH), Simec Atlantis Limited (LON:SAE)

Economic data: US preliminary GDP

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