Berenberg downgrades Vodafone on limited upside

28th May 2014 12:10

Berenberg has downgraded its recommendation for telecoms giant Vodafone from 'buy' to 'hold', saying it sees limited upside for the stock.The broker has slashed its target price for the stock from 265p to 214p after it reduced its operating profit forecasts by around 5% on an organic basis.However, it said that reductions to its headline forecasts "look worse as we bring Project Spring [investment programme] operating expenditure 'above the line' for the first time, factor in higher depreciation and amortisation expense, and update our FX assumptions". The lowered forecasts also reflect worse-than-expected margin trends evident in Vodafone's second-half results and a "sharply-reduced probability that AT&T will bid for Vodafone in the wake of AT&T's $49bn offer for DirecTV"."We also think the shares will struggle to outperform through a first-half results season that is likely to see further pressure on margins before an improvement in the second half."The stock was 0.5% higher at 209.25p by 12:27 on Wednesday.BC