Vodafone ( NASDAQ: VOD ) is among the biggest gainers in Communication Services stocks, its American Depositary Receipts up 5.8% Thursday after an upgrade to Buy at BofA, which sees the stock "bottoming out" with room for upside.
Sentiment about Vodafone is at multi-year lows such that it now screens cheap on rebased consensus forecasts that could see positive revisions from easing energy costs and pricing traction," analyst David Wright said. "And despite sentiment, elements of strategy are proving supportive.
After some underperformance - Vodafone stock ( VOD ) has slipped 27% over the past six months - it now "screens cheap vs. peers," at roughly five times earnings before interest, taxes, depreciation and amortization and with a 9% equity free cash flow yield, Wright noted.
The company could also see some benefit from easing energy costs, price traction and improved cost cutting, with the sale of the Vantage towers a nice deleveraging event.
But there's also "upside optionality" from a change in management that could expedite a strategy to reallocate capital, Wright said - adding that that is key to fund investment into Germany to "future-proof" longer-term growth.
Wright has a price target bumped up to 131 pence (the stock closed in London today at 92.11 pence), and his target for the company's U.S.-traded ADRs is $14.05, currently implying 25% upside.
In other Vodafone news, the company named Aldo Bisio (CEO of Vodafone Italy) to serve as the group's chief commercial officer .
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Vodafone gains 6% as BofA upgrades to Buy on upside options