Berenberg said that just over a year ago, Vodafone (LON:VOD) returned to European service revenue growth in the first quarter of the 2021-22 trading year after three years of decline.
"The bull case, articulated by Vodafone's medium-term ambition, was that revenue growth in Europe and Africa, alongside cost control, would allow for mid-single-digit EBITDAaL and FCF growth," said the analysts.
However, the German bank said it now forecasts European service revenue slipping back into decline in the third quarter, while inflationary cost pressures also meant it now forecasts declines next year in earnings before interest, tax, depreciation and amortisation, after leases, and free cash flow.
"Consensus forecasts for the core German market still need to reduce, which in our view offsets the fact that progress on M&A finally seems to be being made," added Berenberg, which reiterated its 'hold' rating on the stock.
"Vodafone trades on 2022/23E 6.0x EV/EBITDA (versus telecoms incumbents on 6.6x), 13x EV/OpFCF (incumbents: 16x) and a normalised FCFE yield of 10% (incumbents: 6%)."
Reporting by Iain Gilbert at Sharecast.com
