The Vodafone (LSE:VOD) share price is off to a decent start in 2025, climbing by almost 12%, putting it ahead of its parent index. That’s certainly a welcome change of pace compared to the downward trajectory the business has been on since early 2022. And looking at its latest results, this performance is also backed up by improving financials.
Operations in Africa continue to grow rapidly by double-digits as the adoption of its mobile payment solution, M-PESA, captures further market share. Growth in the UK is now set to reignite thanks to the recently completed merger with Three, and performance across Europe’s also bouncing back (with the exception of Germany).
At the same time, higher free cash flow generation, along with non-core disposals, has paved the way for further debt reduction, improving the health of the balance sheet. And when excluding non-cash impairment charges, operating profits during the 12 months leading to March 2025 jumped 12% from €3.67bn to €4.1bn.
Needless to say, this is all pretty encouraging news. And it seems CEO Margherita Della Valle’s efforts to right the ship are finally starting to bear fruit. So if this turnaround continues, how much money could investors make from the recovery by buying £1,000 worth of shares today?
Here’s what the experts are saying
The progress made so far has helped boost institutional analyst sentiment towards this business. While most continue to be cautious with a Hold recommendation, like the team at Barclays, some are more bullish.
For example, UBS sees the fair value of Vodafone shares at 120p by this time next year if the firm can achieve its expected post-merger with Three operational efficiencies. JP Morgan seems to have drawn a similar conclusion with a price target of 110p, citing the incoming cost savings from the ongoing restructuring and expected performance boost in the UK market.
If these projections prove accurate, a £1,000 investment today could be worth up to £1,564 within the next 12 months.
Time to buy?
As previously mentioned, not every institutional analyst is as optimistic as UBS or JP Morgan. Going back to Barclays, the banking giant has highlighted its concerns about competitive pressures in Germany – a fear shared by Goldman Sachs. According to their analysis, the fair value of the Vodafone share price is between 75p and 85p, which is roughly in line with where the stock currently trades. So which analysts should investors listen to?
The group’s weak performance in Germany is problematic. Vodafone has been losing market share for a number of years. Competitors have been offering cheaper alternatives at a seemingly higher quality based on customer reviews.
Under Della Valle, client attrition in Germany has slowed (excluding the recent regulatory changes surrounding bulk TV contracts). Management’s now allocating capital to improve the quality of customer services as well as accelerate the rollout of 5G & Fibre in the pursuit of boosting its net promotor score.
On paper, this strategy sounds sensible. But whether it can be successfully executed remains a big question mark. And with 40% of underlying earnings stemming from this market, a failure to get Germany back on track could significantly adversely impact the business even if other markets continue to perform well.
With that in mind, I’m leaning more towards the side of caution and keeping this business on my watchlist.
