Goldman predicts inflection point at Vodafone as growth returns
The next 12 months will be a "year of inflection" for Vodafone, according to Goldman Sachs which predicts a return to organic growth at the telecoms giant.
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The US investment bank reiterated its 'buy' rating on the stock with a 260p target price.
After seven years of profit declines, it expects Vodafone's European margins to finally stabilise in the year to March 2016 has forecast organic sales to rise around 2%.
"We expect top- and bottom-line growth to accelerate throughout the year as consolidation starts to enable improved data monetization in Germany/Spain, with the UK/Italy likely to follow," Goldman said.
"Given its low margins, Vodafone has the highest operational gearing in the sector to improved pricing power in an increasingly concentrated industry."
Full-year results on 19 May could be the catalyst to improve investor confidence that the business is returning to growth, Goldman said. After organic sales fell by 0.4% year-on-year in the third quarter, it expects the decline to ease to just 0.1% in the fourth quarter.
"Along with attractive M&A optionality (given large potential fixed-mobile cost synergies), in our view this justifies rich near-term valuation multiples; reiterate 'buy'," the bank said.
The stock was up 1.45% at 280.8p by 10:41.