On Wednesday, Citi analysts adjusted their outlook on Vodafone Group PLC (LON:VOD:LN) (NASDAQ: VOD), reducing the price target from GBP0.73 to GBP0.75, while holding a Neutral stock rating.
The change reflects updates to their Vodafone (NASDAQ:VOD) model, notably the recent completion of Vodafone Italy's sale.
The analysts pointed out that Vodafone's operations in Germany continue to be a focal point for investors, with ongoing intense competition in pricing and market share, alongside challenges in multi-dwelling units (MDU) and the need for commercial reinvestment.
These factors are expected to place pressure on the company's EBITDAaL trends in Germany over the next 9 to 12 months.
Despite these challenges in Germany, Vodafone's performance in other regions has been strong, with expectations for continued EBITDAaL growth. This is particularly anticipated as the comparisons in Vodacom are set to become more favorable in the second half of 2025.
The proceeds from the sale in Italy and the anticipated improvement in underlying free cash flow (FCF) are projected to support Vodafone's yield for the fiscal year 2026, which is expected to be attractive at 15% with buybacks. The Citi analysts see potential for a re-rating of Vodafone's stock as earnings momentum could shift in the latter half of 2026.
However, the analysts concluded that despite Vodafone's appealing yield, the risk-reward balance remains neutral, primarily due to the company's performance in Germany.
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