Analyst: buy Vodafone stock despite a slight hit to revenue in Q3

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Vodafone Group Plc (LON: VOD) is in focus on Wednesday after the telecommunications company reported a marginal year-on-year decline in its third-quarter revenue.

Vodafone third-quarter financial highlights

The British multinational brought in €11.64 billion ($12.65 billion) in total revenue, down from €11.68 billion a year ago.

Service revenue grew a less than expected 1.8% on an organic basis primarily related to weakness in Spain and Germany. In the trading update, CEO Margherita Della Valle said:

The recent decline in revenue in Europe shows we can do better. We’ve taken action, including simplifying our structure. In addition, we now have initiatives underway to generate around half of our €1.0 billion cost savings target.

Excluding hyperinflation in Turkey, service revenue in Europe was down 1.1%. For the year, Vodafone stock is up 6.0% at writing.

Is Vodafone stock a ‘buy’ on upbeat guidance?

Also on Wednesday, Vodafone reiterated its guidance for fiscal 2023. The London-listed firm is calling for up to €15.2 billion of adjusted EBITDA this year and €5.1 billion of adjusted free cash flow.

Based on guidance that topped both his and market expectations, Deutsche Bank analyst Robert Grindle recommended buying Vodafone stock in a research note this morning.

His £1.95 price target suggests this stock could more than double from here. The analyst is convinced that the company’s commitment to cost savings will help boost the stock price as well. Last month, Vodafone confirmed that it was pulling out of Ghana (read more).

Grindle also dubs Vodafone an attractive investment because it pays a dividend yield of a whopping 8.50%.

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