- JPMorgan downgraded Vodafone Idea from underweight to neutral with a Rs 9 target
- Vodafone Idea has yet to secure bank funding needed for its Rs 25,000 crore capital raise
- JPMorgan considers Vodafone Idea's EBITDA target aggressive and possibly overestimated
At a time when Vodafone Idea is fighting many battles, JPMorgan has indicated it may have more battles to fight, as the brokerage firm downgraded its stance on the cash-strapped telecom operator, citing multiple headwinds.
In its latest note, JPMorgan has downgraded its stance from 'underweight' to 'neutral' while retaining the price target of Rs 9. The firm has pointed out some critical concerns surrounding the stock's future, adding that the company has multiple hurdles to cross before the business stabilises.
For one, JPMorgan highlights that Vodafone Idea has yet to receive the bank funding required to raise fresh capital, which, in turn, will be integral to the company's survival plan.
Indeed, Vodafone Idea is looking to raise at least Rs 25,000 crore over the next couple of months. But those plans are hinging on banks' funding the raise. So far, Vodafone Idea has yet to find any suitors.
Moreover, the firm has highlighted that the company's Ebitda target looks aggressive and potentially overestimated, failing which could put some downward pressure on the counter.
There is also a case of subscription and market share loss. While JPMorgan admits the subscription loss trend has been largely arrested, the telecom operator is yet to find a solution to mitigate rapid market share loss against competitors Airtel and Jio.
Keeping these factors in mind, JPMorgan has turned bearish on the counter, with its current target price of Rs 9 suggesting a downside of 23% from Wednesday's closing price of Rs 11.7. In the last 12 months, the stock has gained 40%, but is trading with a relative strength index of 76, which suggests the scrip could be in an overbought territory.
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