JPMorgan has retained its Underweight rating on Vodafone Group (LON: VOD), the mobile and broadband operator, according to Proactive Investors. Analyst Akhil Dattani said near-term risk-reward has weakened after the rally and after Xavier Niel’s move to buy e&’s stake.
Vodafone shares closed at 116.75p today, down 0.6% from 117.45p, within a range of 116.7p to 118.655p. That leaves them about 11.6% below the 52-week high of 132.072p. The shares had climbed from the high 90s in summer to a peak near 132p in September.
The first of three risks it names is in Germany. A European Court of Justice (ECJ) ruling could invalidate Vodafone Germany’s 2023 price rise. JPMorgan forecasts German service revenue growth slowing from 1.2% in the first quarter to a fall of 0.5% in the second and 2% in the third.
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The second is Kenya. A Kenyan High Court ruling on the 15th of October concerned Vodacom’s stake in Safaricom, though Vodacom has interim relief. The third is OXG, the fibre venture, where equity injections could exceed €1bn after a 50% stake was sold to Société Générale on the 1st of September.
Vodafone shares rallied from a lowest close of 97.76p on the 9th of July to a close of 131.75p on the 17th of September, before pulling back to 116.75p today. JPMorgan reiterated its Underweight rating today.
The 0.6% fall looks too small to read as a reaction to the note. A reiterated rating is not a downgrade, so the shares are being weighed against the three risks rather than a change of view.
Half-year results are listed for the 10th of November, though Vodafone has not confirmed the date. Developments on the ECJ case, Safaricom and OXG funding are the other markers.
