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Is now the time to buy Telstra Corporation Ltd (ASX:TLS) shares?

Source: Telstra presentation

The market may be sinking lower but that hasn’t stopped the Telstra Corporation Ltd (ASX: TLS) share price from pushing higher on Monday.

In late trade the telco giant’s shares were up 1.5% to $3.13 before closing the day 0.7% higher at $3.10.

Are Telstra’s shares in the buy zone?

Whilst I’m still sitting on the fence with Telstra, one broker that is more positive on its prospects is Goldman Sachs.

According to a note out of Goldman Sachs late last week, it has retained its conviction buy rating and $3.60 price target on Telstra’s shares following the release of its executive remuneration update.

This price target implies potential upside of 15% for its shares over the next 12 months, excluding dividends.

If you add its dividend into the equation, Goldman expects Telstra to declare a dividend of 17 cents per share in FY 2019, the total potential return extends to over 20%.

Why does Goldman like Telstra?

Goldman Sachs was pleased with Telstra’s full year results in August and the accelerating subscriber momentum across each of its key business lines.

It was particular impressed with the performance of its key postpaid mobile segment which delivered its strongest half of growth in five years. This allowed Telstra’s mobile business to achieve 70% market share of net adds in the fourth quarter of FY 2018.

More recently, the broker was pleased with the company’s remuneration plan which includes quantitative targets for the first time. These include plan simplification and digital sales targets.

Telstra aims to cut its plan numbers down significantly over the coming years to simplify things and is targeting digital sales of 45% by FY 2022. The latter compares to digital sales of just 6.2% in FY 2018. I agree with Goldman that these targets are a positive and should result in a much stronger business if they are achieved.

But until Telstra has provided an update on FY 2019 and gives guidance for its dividend, I’m keeping my powder dry. This is just in case its dividend plans undershoot market expectations and put pressure on its shares.

But if its dividend plans are in line with expectations then I would consider buying its shares ahead of industry peers TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC).

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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 and Vocus Communications Limited. The Motley Fool Australia has recommended TPG Telecom 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.

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