Vodafone shares are a ‘buy’ as the group reports yet another quarter of growth

4th February 2016

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As Vodafone delivers its third quarter trading update, two brokers explain what it means for investors…

Ian Forrest, investment research analyst at The Share Centre comments:

Vodafone’s third quarter results today were reassuring for investors and they confirmed the improvement in its European markets seen earlier in the year.

Overall revenues rose 2.6% to £10.3bn on an organic basis and the group picked out positive trends in Germany, Italy and South Africa as especially noteworthy.

The use of data continues to grow and 4G services are now available across 84% of Europe.

We continue to recommend the shares as a ‘buy’ as the group generates a large amount of cash from its operations and the healthy dividend is appealing to income seekers, especially those looking for a lower level of risk.

Interested investors should note that Vodafone retains a significant portion of the proceeds from the sale of its Verizon stake and will need to use that to compete with peers who are offering the “quad-play” of services – fixed line telephone, TV, broadband and mobile.

Nicolas Ziegelasch, head of equity research at Killik & Co is also calling the shares a ‘buy’, he comments:

The group reported third quarter trading results that were largely in line with market expectations.

Performance in Europe continues to improve, with service revenue largely flat, driven by good growth from fixed line products. AMAP service revenue saw good growth, with strong performances from South Africa, Turkey and Egypt.

The Project Spring rollout is largely complete, with better customer experience and greater use of data.

The group continues to reposition itself towards becoming a full service integrated operator for both households and businesses in its main markets and management reaffirmed the outlook for the full year.

We remain positive on the investment case for Vodafone as the benefits from the increased investment in network improvements continue to come through.

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