Jefferies International gave a lift to Vodafone PLC (LON:VOD) on Friday, upgrading its rating for the mobile phones giant to ‘buy’ from ‘hold’ after upping its target price as it looks at two tracks the company could take to boost valuation.
The US investment bank’s analysts hiked their target for the FTSE 100-listed firm to 176p from 144p, which they say offers 22% upside, including the dividend, on a one-year view.
Vodafone shares were changing hands on Friday at 153.88p each, up 1.9% on Thursday’s close.
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In the note to clients, the Jefferies analysts said they had outlined an Organic Track for Vodafone to grow returns and earn its cost of capital within three years, whilst reducing leverage by a quarter.
Then, as an alternative, they described a Tower Track, with credible and practical scenarios for monetising the firm’s European mobile tower assets that would reveal a Vodafone RumpCo offering attractive returns and low leverage.
The analysts concluded that they believe that Vodafone RumpCo is implicitly valued at an unwarranted discount after showing how tower monetisation can justify higher fair values in a range of approximately 210p to 230p.