After a lengthy downwards trend, shares in Telstra Corporation Ltd (ASX: TLS) are currently sitting just below their 10-year high of $5.40, achieved in March 2005.
That's because in the past three years its share price has been growing rapidly, up 75% not including dividends. Far outperforming the S&P/ASX 200's (ASX: XJO) (INDEX: ^AXJO) gain of just 19%.
This has prompted some analysts, such as those at Bank of America Merrill Lynch, to believe the stock could be on a trajectory which will see it hit $6 per share. More bearish analysts have put price targets around $5.73 on the stock.
Could they be right? Does Telstra still represent both an income and value play for investors?
On the one hand, we have a telecommunications giant which is giving up ownership of an extensive and extremely lucrative copper cable network which has connected millions of Australians to phone and internet services for many years. However, Telstra will walk away from the bargaining table with its $11 billion contract. This though will put it on a level playing field with competitors such as Optus – owned by Singapore Telecommunications Group (ASX: SGT), Dodo and Primus – owned by M2 Group Ltd (ASX: MTU), iiNet Limited (ASX:IIN) and TPG Telecom Ltd (ASX: TPM).
So the deal between the government and Telstra could go one of two ways. However, all parties involved in the NBN rollout have assured the market that Telstra's shareholders will be left no worse off under a new arrangement.
As a result, in the future Telstra's extensive mobile network, ability to bundle products and customer service will become key selling points for maintaining market share throughout Australia.
In addition, Telstra has ambitious plans for Asia. A region which management believes holds significant long-term potential. By 2020 CEO David Thodey hopes the company can draw one third of revenue from overseas. He was recently quoted in the Sydney Morning Herald as saying, "I would like to think at least a third of our revenues and profits came from offshore by some period to 2020 and beyond. That's a reality that the company has got to face."
This type of expansion can present a number of potential pitfalls to shareholder wealth, and will raise the eyebrows of many risk-averse investors. However, once again, this can go one of two ways and Telstra's recent successes in Asia, particularly China – through its holding in businesses such as Autohome Inc (NYSE: ATHM) and a number of other strategic joint venture partnerships, appears to give rise to a successful campaign.
Should you buy?
Telstra offers a strong fully franked dividend, equivalent to 5.4% at today's price, in a record low interest rate environment and it has ambitious growth prospects for the next 10 years. I think it will reach $6 per share but your guess is as good as mine as to when it'll be achieved.
