MENU

Is the Telstra Corporation Ltd (ASX:TLS) share price in the buy zone?

The Telstra Corporation Ltd (ASX: TLS) share price has followed the lead of the market and pushed higher on Thursday.

In early afternoon trade the telco giant’s shares are up 0.3% to $2.82.

While this is just a small gain, it could be the start of much greater gains for the Telstra share price if one leading broker is correct.

According to a note out of Morgans, the broker has retained its add (buy) rating and lifted the price target on its shares slightly to $3.47.

This price target implies potential upside of approximately 23% for the Telstra share price over the next 12 months excluding dividends.

Speaking of which, Morgans suspects that Telstra will have to cut its dividend in FY 2019. It has forecast a cut to 17 cents per share from the current payout of 22 cents per share.

Based on the current share price this equates to a forward yield of 6%, which brings the total potential return on investment to 29% for investors.

In light of this, its analysts think that now could be a good time to invest in Telstra because there are unlikely to be any surprises in next week’s results given its recent investor day briefing.

Furthermore, with the market appearing to have priced in a dividend cut already, it seems unlikely that its shares would drop lower if management does indeed cut.

Should you invest?

While I do think that it is a tempting investment option and could be a great contrarian play, I intend to stay on the sidelines a little longer.

The shares of Telstra and its peers TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC) have looked cheap for some time now but have continued to sink lower as competitive pressures intensify.

Unfortunately, I don’t expect competition to ease any time soon and this could weigh heavily on their performances and investor sentiment for a while to come. Incidentally, Morgans rates TPG Telecom and Vocus as holds.

Instead of Telstra I would be buying one of these buy-rated shares.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.

And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. 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 Scott Phillips.

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.