Shares in telco giant Telstra Corporation Ltd (ASX: TLS) have continued to push higher in morning trade today, on the back of solid full-year results released last week.
However the huge rise in its share price over the past few years has prompted some analysts to move the stock from 'Buy' to 'Hold'. On grounds of valuation, I share this sentiment on the stock.
Purely from a business perspective however Telstra remains one of the best long-term blue-chip investments in the S&P/ASX200 Index (INDEXASX: XJO) but, as any savvy investor will tell you, no stock is a buy at any price.
In the short-term I believe we'll likely witness a continued demand for Telstra shares, largely a result of its impressive 5.3% fully franked dividend yield and I'm not alone. Stockbroker Bell Potter, recently reiterated its $6.00 price target but cut its 'Buy' rating to a 'Hold'.
In the coming year, Telstra's management provided FY15 guidance of broadly flat EBITDA and total income. However, as they proved with their recent results, even Telstra has the ability for upside surprises.
Taking a longer-term look at Telstra's growth prospects, demand for its services will grow, albeit modestly off a large base. I expect that while mobiles growth could slow in the short-to-medium term, new growth areas such as machine-to-machine (which, impressively, grew revenues 12% year-on-year) and the Network Application Services (NAS) division will feature prominently.
Buy, hold or sell?
Given Telstra's current valuation, short and long-term growth prospects and the current macroeconomic environment I rate Telstra as a 'Hold'. To be more precise, I believe any purchase of shares between $4.70 and $5.30 was a good price to pay, but I wouldn't be prepared to pay anything more. However current shareholders don't want to miss out on the regular dividend payments and long-term earnings growth potential either, so it's great one to hold if you already own it!
