Goldman Sachs added buy-rated Vodafone to its ‘Conviction List’ on Tuesday, with its thesis predicated on the company’s “superior structural growth, compounded by best-in-class digital efficiencies, driving sector-leading free cash flow and returns improvement”.
The bank said two recent updates were more bullish for the top-line structural growth outlook than it had expected, with German revenue growth acceleration and a business-to-business CMD that implied consistent, returns-accretive revenue growth, versus peer declines.
Goldman, which lifted its price target to 195p from 165p, said FY21 results could bring mid-term guidance for consistent European top-line growth as well as free cash flow and returns growth above consensus expectations.
“We would expect this to catalyse a re-rating for one of our top value picks in the sector,” it said.
Goldman noted that Vodafone trades at a 28% sector discount and said this is not justified by ramping returns and superior growth.
