Should you buy Telstra Corporation Ltd for 2015?

As Australia’s largest telecommunications business Telstra Corporation Ltd (ASX: TLS) receives a lot of analyst coverage, with varying levels of credibility.

Today’s Fairfax business media is reporting that an analysis by European financial services group Credit Suisse suggests Telstra’s recent success in dominating mobile market share will come to an end during the 12 months ending June 2016.

The clairvoyants at Credit Suisse have reportedly cut to Telstra to an underperform with a 12-month price target of $5.55. The Fairfax press has reported that the analysts are worried “the tide will turn during the 12 months ending June 2016” for Telstra and its dominance of mobile market share.

Although making predictions about mobile market share out to June 2016 might seem a long way out, the team at Credit Suisse have not just been turning the tarot cards to come to this conclusion. Rather their analysis is based on multiple assumptions around data plans, pricing, consumer trends and resurgent reputations.

The predictions are also reportedly based on the fact that Optus, owned by Singapore Telecommunications Ltd (CHESS) (ASX: SGT), just posted an apparently strong quarter of postpaid mobile subscriber growth.

Vodafone Australia is operated by Hutchinson Telecommunications (Aus) Ltd (ASX: HTA) and Credit Suisse also expects it to start applying the competitive squeeze on Telstra. This despite the idea that Vodafone’s mobile network is a proven customer loser, whereas Telstra’s dominance is based on its best-in-class reputation.

In August 2014 another gun telco analyst team at the Commonwealth Bank of Australia (ASX: CBA) declared Telstra was “very unlikely” to launch a share buyback just before the company announced the biggest share buyback scheme in its history.

Perhaps the mountain of cash sitting on the company’s balance sheet with nowhere to go escaped the CBA team’s attention, or more likely they just got it wrong.

Either way this goes to show why it’s often not worth paying attention to analysts’ 12-month price targets or short-term predictions for businesses like Telstra.

Rather the key to investing success is identifying businesses that will deliver long-term outperformance. Once identified you buy to hold and let the power of compounding returns work their magic.

For example this company has not only managed to doubled its dividend over four years, but it has grown earnings per share every year it has been a listed company. The company has been named The Motley Fool's favourite stock to buy now and the Fool is very confident it'll be a winner to compound your returns 5, 10, 15 or 20 years out from now! If you're interested in reading about it just enter your email and we'll send the report for FREE!

Motley Fool contributor Tom Richardson owns shares in Telstra Corporation Ltd. You can find him on Twitter @tommyr345

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.