Broker snap: Profit-taking risk at Vodafone

11th Aug 2010 10:43

With Vodafone trading at a 52-week high Nomura Securities sees several reasons for profit-takers to emerge over the summer.The broker cited the company's exposure to the US dollar, which could prove a drag on earnings, as a reason to sell, as well as the widening revenue underperformance in Europe, the mobile termination rates regulatory risk and the deferred update on portfolio optimisation.On top of that, the broker notes, Vodafone's discount to its discounted cash flow valuation is now below 10%, compared to a discount of 14% for the sector, and the stock "is no cheaper than the sector" on a ratio of 5.3 of enterprise value to earnings before interest, tax, depreciation and amortisation.Though Nomura is bullish on the sector it is agnostic on Vodafone and thinks that with the strategy update from the company not due until autumn "excitement may not be sustained".The broker has a price target of 168p for the stock.