Broker snap: Vodafone to profit from Verizon iPhone

14th Dec 2010 10:40

Vodafone deserves a premium rating due to the combination of the mobile phone giant's improving profit trend, premium cash conversion and clear dividend upside, says Nomura.The iPhone is expected to be on wireless operator Verizon's (VZW) shelves in early 2011, and analyst James Britton expects its impact to boost net income at Vodafone, which owns about 45% of VZW, by 2-4%, or $280m-560m. Nomura amends its VZW forecast and therefore upgrades Vodafone earnings per share assumptions by 2% for 2012 and 4.5% for 2013. The Japanese broker also notes that the resolution of the Vodafone/Verizon overhang could happen early next year, and a full payout of VZW cashflows would add an extra £2bn to medium-term free cash flow estimates for Vodafone, prompting a dividend per share upgrade to at least 12.5p.It sticks with a 'buy' rating and lifts the target price by 5p to 205p.