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Mobile phones giant Vodafone appears to be ringing all the wrong numbers as far as City analysts are concerned these days.
Its heavily weighted shares retreated 2.8p to 112.2p today with more than 100 million changing hands after several more brokers, worried about prospects for the phone operator, moved to downgrade. UBS has cut from buy to neutral and set a short-term sell rating. It has slashed its target from 150p to 115p. Morgan Stanley remains overweight but has trimmed its target from 175p to 170p.
Société Générale yesterday repeated its sell rating and dropped its target from 110p to 105p. Brokers are becoming increasingly wary about the loss of fundamentals at the mobile phone operator. UBS blames economic pressures, loss of market share and a decline in earnings of 11% this year. It also warns the group has lost share in three of its four main markets.
Shares generally continued to be squeezed higher as the bears moved to cover their positions following the recent sell-off. Strong performances overnight in the US and Far East made their task harder. The FTSE 100 index rose 34.26 to 4236.39.
Banks were marked better on the back of strong second-quarter numbers from Goldman Sachs. Long-term banking bear Meredith Whitney started the ball rolling yesterday with a buy rating on the shares. Drawing strength from Goldman, Barclays put on 9.15p at 305.5p, and Lloyds Banking Group added 2.07p to 66.6p.
Chinese imports of raw materials, such as iron ore and copper, are failing to be reflected in its exports. That suggests China is continuing to stockpile vast amounts of commodities in the belief it will be well-placed once the upturn in the global economy comes.
Mining shares lost ground in the second quarter, reflecting seasonally weaker demand. But UBS expects them to start making up the lost ground in the third quarter following a “cyclical upswing” in the final quarter which will peak in 2011. Its top pick in the sector is Rio Tinto, up 88p at 2010p. It is also a buyer of Vedanta Resources, 45p better at 1384p, but remains neutral on BHP Billiton, 39½p higher at 1376½p.
Traders on the commodity market are convinced the price of silver is set to soar, and that could be good news for the Mexico-based producer Fresnillo, the world's biggest producer of the metal. Its shares climbed 38½p to 508p. Fresnillo is due to publish production numbers on Thursday.
A fresh bout of speculative buying hoisted Heritage Oil 31½p to 471p. Heritage is already the subject of a £3.3 billion merger with Turkish oil supplier Genel Energy International, but the gossips now say Royal Dutch Shell, up 9p at 1472p, may be tempted to gatecrash the party and offer 700p a share for Heritage.
Gulf Keystone firmed ¼p to 13¼p after announcing plans to pull out of Algeria and focus its exploration interests on Kurdistan. The company has already met with success in Kurdistan that shareholders should expected to benefit from. It will now look for a buyer for its interest in the Hassi Ba Hamou Permit in central Algeria.
Several brokers have taken a close look at the drugs sector, resulting in an upgrading of the UK's two biggest drug producers following recent positive news and a poor performance by their shares. UBS has repeated its buy rating on AstraZeneca, up 7½p at 2687½p, from 3100p to 3350p and increased the sales target for the Anglo-Swedish group's best-selling drugs. It has raised its 2014 sales target for its cancer treatment Iressa from $801 million to $1 billion while those of its breast cancer treatment Olaparib go up from $43 million to $445 million. Sales of Nexium, used to combat heartburn, are estimated to come in at $600 million by 2014.
Rival Swiss broker Credit Suisse has lifted its target for Astra from 1890p to 2400p. UBS has also raised its target for GlaxoSmithKline, 4p better at 1115p, from 1057p to 1125p while Credit Suisse has moved from 1225p to 1325p.
