Shareholders of TPG Telecom Ltd (ASX: TPM) just can't seem to catch a break at the moment. The growing telecommunications company's shares have dropped lower yet again despite no news out of it. This time they have dropped by as much as 5%, extending their monthly decline to a massive 35%.
Although it is clearly a difficult time to be a shareholder, I would suggest investors stick with it. TPG Telecom's shares may have been trading on a high earnings multiple, but I don't believe for a second that its recent full year results justify it losing over a third of its market value.
Whilst it was disappointing to see management forecast for higher capital expenditures and lower-than-expected growth in the year ahead, I feel confident that the company has strong long-term growth prospects thanks to the potential market share gains it could win from rival Telstra Corporation Ltd (ASX: TLS) through the NBN rollout.
I don't appear to be alone in this view either. Analysts from both Citi and Morgan Stanley have recommended TPG Telecom as a buy in the last couple of weeks.
According to their research notes they have placed price targets of $13.35 and $10.75 respectively on its shares. With its shares trading as low as $7.85 today there is significant upside potential as far as these analysts are concerned.
Only time will tell whether TPG Telecom's shares will reach these price targets. But if the company can convince the market that the forecast 7% EBITDA growth for the year ahead is just a temporary slowdown, then I fully expect its shares to retrace a good portion of these declines.
Right now I would put TPG Telecom up there with fellow telco Vocus Communications Limited (ASX: VOC) as one of the most attractive investment options for investors on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
