JP Morgan has rated Vodafone Group PLC (LSE:VOD) shares as ‘overweight’ even though it highlights headwinds in Germany and says the near-term growth outlook is “underwhelming”.
Vodafone finally moved back into positive growth territory in March, after several years of revenue decline in its European service business.
Akhil Dattani, JPM's head of European telecoms equity research, however, said headwinds in Germany are likely to offset any other improvements, leaving the overall growth outlook for the company “underwhelming”.
Dattani said any re-rating would depend on the optimisation of Vodafone's portfolio.
“Against this backdrop, we remain of the view that any future re-rating of Vodafone’s shares depends wholly on management’s ability to deliver on targeted portfolio optimization,” the analyst note said.
“We continue to believe that 2022 will deliver both an industrial towerco merger and UK mobile consolidation – events that should support both meaningful deleveraging and value realisation.”
The broker's price target is 175p.
Vodafone's London-listed shares dropped 3.26% to 126.3p on Wednesday.