Image source: Vodafone Group plc
Since the start of 2025, the Vodafone (LSE:VOD) share price has started making a bit of a comeback. The restructured telecommunications enterprise has begun restoring favour with investors, lifting its market-cap by 28% since the start of the year.
While there’s still a lot more progress needed to return to its higher 2021 levels, a £5,000 investment back in January is now worth roughly £6,595, including dividends. That’s double what passive FTSE 100 index investors have earned. But of course, the question now becomes, can the stock do it again in 2026?
Latest expert predictions
Despite the impressive progress Vodafone shares have made this year, most institutional analysts remain neutral about the stock’s outlook over the next 12 months. However, UBS does stand out as one of the most optimistic and has even placed a 120p price target on the stock.
Compared to where shares are trading today, this suggests the potential for a 39.2% capital gain, backed up by a further 4.5% from dividends. In other words, if UBS’s projection is accurate, a £5,000 investment today could grow to £7,184 by this time next year.
That’s a pretty ambitious target. But digging deeper, there are some growth catalysts that might make it possible. The group’s recent merger with Three in the UK is expected to deliver up to £700m in annual cost synergies, along with a €400m incremental uplift in underlying earnings.
At the same time, the investments into boosting service quality in its core German market are showing encouraging early signs. Excluding the recent changes to TV bundling laws, customer attrition has slowed while the group’s net promoter score has increased.
There’s significant room for improvement. But with fewer customers jumping ship to competitors, Vodafone’s finances seem to be stabilising. And if Germany is successfully restored to growth, the subsequently increase in free cash flow generation can provide some much-needed flexibility to tackle its troublesome leverage.
Not out of the woods yet
Even as one of the most optimistic analyst teams, UBS has still highlighted several critical risk factors that could invalidate its 120p price target.
Even with encouraging signals, it’s still too early to say whether Germany will return to meaningful growth. As for the Three UK merger, synergies may simply fail to materialise. Even if they do, there remains significant execution and integration risk. Don’t forget, on average, larger-scale acquisitions and mergers often fail to meet expectations due to unforeseen complications.
At the same time, with over €53bn of debts and equivalents on its balance sheet, even if everything goes according to plan, a large chunk of excess cash flow will undoubtedly have to be used to reduce leverage. While that’s a positive in terms of improving the group’s financial health, it also means there’s less funding available for innovation – an opportunity that competitors will no doubt try to exploit.
The bottom line
My opinion on Vodafone and its share price potential’s improving. However, considering its sticky operational and financial situation, the company has a long recovery journey ahead, which could be derailed at any time.
Therefore, I think there are far more promising and lower-risk opportunities for investors to explore today.
