Berenberg upgraded Vodafone Group plc on Wednesday to 'buy' from 'hold' and lifted the price target to 119p from 82p as it highlighted the potential for free cash flow growth and a strong balance sheet.
The bank said it was raising its long-term free cash flow forecasts for the company following its recent strong Q2/H1 2026 results.
Berenberg said it believes that Vodafone can now deliver sustainable free cash flow and dividend growth in the coming years.
"Furthermore, the company has substantial future capacity for value-creation opportunities (eg further share buybacks and small bolt-on M&A), with an increasingly robust balance sheet (circa €1bn is expected to be received in the coming days from Zegona Communications' share cancellation)," it said.
Berenberg said it was increasingly confident Vodafone can execute well in its core markets. It expects management to deliver modest growth and improving profitability in Germany, helped by improving market conditions.
It also expects management to effectively execute the integration of Three UK, realising its synergy targets in the process.
Finally, the bank said management was set to be a sensible steward of capital, focusing on core markets and on further simplifying the relatively complex group structure.
At 1010 GMT, Vodafone was the top gainer on the FTSE 100, with the shares up 3.1% at 103.60p.