Vodafone ‘s stock price hit a 25-year low this month — but sentiment could also be turning around. Bank of America analysts upgraded the U.K. company’s stock to “buy” on Thursday, saying they expect shares to rise by 42% to £1.31 ($1.60) over the following 12 months. Shares have risen 4% to £0.91 because the investment bank’s rating upgrade. The stock also currently offers a dividend yield of 8.4% Following news of Chief Executive Nick Read’s departure , the BofA analysts led by David Wright said they were optimistic concerning the company’s prospects. The change in management could bring forward investments into Germany, they said, and secure the worldwide telecom operator’s long-term growth potential there. Germany is the British firm’s largest market and accounts for over 40% of its operating free money flow. “A transparent miss has been poor execution in Germany, but this looks to be recovering following management change, while we expect mixed execution of digital cost-cutting targets may be reinvigorated,” the analysts said. VOD 5Y line Despite this optimism, BofA’s analysts consider Vodafone will still must cut dividends by 30% to maintain the balance sheet sustainable. The FTSE 100 company has attempted to mitigate those concerns by selling off a part of its stake in Vantage Towers, Europe’s largest operator of cell phone masts. It hopes to recuperate greater than 3.2 billion euros (£2.8 billion) from the sale. Vantage Towers , previously an entirely owned subsidiary of Vodafone, owns 68,000 sites and was spun off from Vodafone in July 2020. The move was a part of an asset sale program that began under Read to extend the corporate’s concentrate on Europe and Africa. In December, Abu Dhabi-headquartered Etisalat was reported to be in talks to amass Vodafone’s stake in African telecom operator Vodacom . UBS analysts, who’ve a buy rating on the stock, valued the potential sale at 7.9 billion euros but warned the deal might dent Vodafone’s free money flow by 15%. “We expect investors could see the news on Vodacom as positive in terms of doubtless simplifying the Group, crystallising value and potentially opening the door for M & A elsewhere with the Group CEO having recently stepped down,” said UBS analysts Polo Tang and Dhruva Kusa Shah in a note to clients on Dec. 7. Analysts expect the corporate’s Nadsaq-listed stock to rise by 27% to $14.28 over the following 12 months, in keeping with the median price goal compiled by FactSet. Vodafone’s London-listed shares are seen rising by 32% to £1.22 over the following 12 months.
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