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Vodafone shares drop as UBS cuts target price and predicts slowdown in growth

UBS maintained a ‘buy’ rating on Vodafone but lowered its target price to 250p from 255p, saying it thinks the shares are “too cheap”
Vodafone reports its first quarter results on Wednesday

Vodafone Group PLC (LON:VOD) shares dipped as UBS cut its target price on the stock and said it expects the telecoms firm to report a slowdown in organic service revenue in the first quarter.

The company reports its first quarter results on Wednesday and UBS estimates organic services revenue to rise 0.1%, compared to 1.4% in the fourth quarter, due to weakness in Spain and Italy, along with an increased drag from UK handset financing.

However, UBS said this slowdown was already flagged at the fourth quarter results and since then shares have fallen 10%.

READ: Vodafone announces departure of CEO Vittorio Colao as it swings to full year profit

“VOD shares are trading at the bottom end of a five-year trading range, despite the company having transformed its portfolio and realising a tailwind from cost savings,” it said.

UBS maintained a ‘buy’ rating on the stock but lowered its target price to 250p from 255p, saying it thinks Vodafone shares are “too cheap” and the company offers a dividend yield of 7.5% for 2018.

It thinks investor expectations for the first quarter are low and a re-iteration of full-year guidance should provide reassurance.

Shares dropped 1.03% to 176p in morning trading. 

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