Vodafone shares boosted by Berenberg upgrade to 'buy'

Vodafone's share price was performing well on Wednesday after the telecoms stock was upgraded by Berenberg from 'hold' to 'buy'.The broker, which hiked its target price for the shares from 214p to 270p, said the valuation was "attractive" after the stock's underperformance over the last year."We think operating trends will continue to improve, group return on assets and free cash flow (FCF) will recover strongly in FY17 from lows in FY16, which will support the attractive 5% dividend yield and dividend growth," Berenberg said.Meanwhile, the German bank said that recent concerns about a "bad" Liberty Global acquisition have been overdone with the market too worried about potential valuations and deal funding.Berenberg suggested that Vodafone should pre-fund a Liberty Global deal by selling its Africa, Middle East and Asia-Pacific assets which could raise around £31bn."Vodafone shares have not performed well since the Verizon distribution (end-March 2014) due to currency weakness, spectrum costs and fears of a Liberty Global deal. While headline operating FCF multiples look only fair value, the shares do look cheap on EV/EBITDA and against the domestic operations of major peers."The 5% dividend yield decides it for us, being better than all of its major peers except Telefónica, whose dividend we think is more risky."Vodafone was trading 1.6% higher at 223.38p by 09:44.