Goldman Sachs sees diverging prospects for Vodafone and Orange

Investing.com -- Goldman Sachs upgraded Orange to Neutral and downgraded Vodafone (NASDAQ: VOD) to Sell in separate notes Thursday, citing divergent prospects for inorganic growth and return on capital in the European telecoms sector.

For Orange, Goldman said, “increasing inorganic upside potential offsets weak organic growth and returns.”

The firm sees “+30% equity upside from market repair benefits resulting from French in-market operator consolidation,” noting that press speculation around a potential deal has intensified.

“We see additional upside from potential Spanish telcos M&A,” analysts wrote.

Goldman now values Orange at €15.4 per share, implying a potential 16% upside. While the firm concedes its prior Sell rating “was wrong in 2025,” the new stance is said to reflect better modeling of possible consolidation benefits.

Orange’s organic outlook remains muted, with France’s competitive structure keeping 2024–29 ROIC at just 0.9% versus a sector average of 2.5%, according to Goldman Sachs.

In contrast, the bank believes Vodafone faces more structural challenges. “We downgrade Vodafone to Sell from Neutral,” Goldman wrote, citing “reduced confidence in its organic growth&returns outlook and with limited mobile consolidation upside.”

Goldman forecasts Vodafone’s ROIC will rise just 0.7 percentage points by FY30, reaching 6.6%, which it calls “uncompelling.”

The bank explains that Germany, which contributes around 40% of Vodafone’s EBITDA, is the primary concern, with the firm expecting “a broadly flat German EBITDA CAGR across FY25–30.”

On consolidation, analysts warned that “costs involved in its UK consolidation merger with Three limit ROIC improvement,” while in Germany, “the potential loss of a wholesale contract would offset much of the market repair benefits.”

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