Goldman Sachs Upgrades China Mobile (CHL) to Conviction Buy

Goldman Sachs upgraded China Mobile (NYSE: CHL) from Neutral to Conviction Buy with a price target of $61.00.

Analyst Donald Lu said, "We view rapid LTE adoption as a potential driver of data ARPU at CM, based on current incremental LTE ARPU of Rmb20-30. We expect strong 3G and LTE data growth to reverse CM’s ARPU decline in 2015 (ex- VAT tax reform). At SK Telecom and Verizon, two leading global LTE service providers, ARPU and EBITDA recovery after LTE launch resulted in significant share appreciation. We believe CM is in a similar position, and its potential ARPU and EBITDA rebound could drive a share price rerating."

"We see four catalysts in the next 12 months: 1) We expect rapid LTE adoption when the floor price of LTE smartphone reaches US$100 in 2H14. 2) We forecast CM’s ARPU (ex-VAT tax reform) to stabilize or improve slightly yoy in late 2014 or early 2015. 3) We expect the potential strong replacement demand for iPhone 6 to support LTE ARPU and help CM to gain market share. 4) The potential commercial launch of VoLTE should further strengthen CM’s competitive stance, in our view," he added.

For an analyst ratings summary and ratings history on China Mobile click here. For more ratings news on China Mobile click here.

Shares of China Mobile closed at $49.65 yesterday.

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