Citigroup: Telstra Corporation Ltd shares are worth $3.25

Citigroup lowers its target price and forecasts significant loss of earnings after the completion of the NBN for Telstra Corporation Ltd (ASX:TLS).

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Analysts at Citigroup have reaffirmed their sell rating on shares in telecommunications giant Telstra Corporation Ltd (ASX: TLS). The analysts also reduced their share price target from $3.35 to $3.25, implying approximately 8% downside (excluding dividends) from Monday's closing price of $3.53.

Earnings Downgrade

The note from Citi estimates that core earnings per share will decline by approximately 43% from the 2017 financial year to the completion of the NBN roll-out in the 2021 financial year.

The analysts forecast Telstra's 2018 financial year earnings per share at 22.70 cents. 2017 has been a terrible year for Telstra shareholders with the company's share price declining 31%.

The stock has been sold off by 18% since mid August after the company released its 2017 earnings and announced it will be cutting its FY 2018 dividend from 31 cents a share to 22 cents a share. With rival TPG Telecom Ltd (ASX: TPM) launching its very own 5G network with an aggressive strategy to capture market share along with the increased adoption of the NBN, investors may want to park their money elsewhere.

Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of Telstra Limited and TPG Telecom. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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