The Telstra Corporation Ltd (ASX: TLS) share price has been on a rollercoaster ride on Thursday following the release of its half year results.
The telco giant's share price was down as much as 4% in early before rebounding to be flat. Whereas now in afternoon trade it finds itself down 2.5% to $3.13.
But it may not be down in the doldrums for much longer according to one leading broker.
A note out of Goldman Sachs today reveals that its analysts have made no changes to their conviction buy rating and $3.60 price target following today's release.
What did Goldman Sachs think of the result?
On the whole, Telstra's result appears to have ticked a lot of boxes for the broker.
Starting with the positives, the company's net income, EBITDA, and net profit after tax all came in higher than Goldman forecast, partly due to lower than expected depreciation and amortisation.
Telstra's Mobile business reported 239,000 net postpaid subscriber additions during the half, compared to the broker's forecast of 150,000. Further, the segment's average revenue per user metric may have declined by 2.4% on the prior corresponding period, but this was notably lower than the 6% decline forecast by Goldman.
Goldman was also pleased with the performance of Telstra's Fixed segment, which suffered fewer declines than expected.
One final positive was the reiteration of its full year guidance. This was all in-line with the expectations of its analysts.
The negatives.
There were a few negatives, though. Its interim dividend of 8 cents per share was a half a cent lower than its analysts expected.
And its "cash conversion was poor" during the half, though this had been flagged previously by the company. Goldman notes that as a result of this weakness, the company's net debt to EBITDA increased from 1.5x to 1.7x. Which puts it at the upper end of Telstra's comfort band of 1.3x to 1.8x.
Finally, its overall costs were higher than expected. Though the broker appears happy to overlook this due to management advising that cost-outs would step up in the second half and again in FY 2020.
Foolish Takeaway.
While it remains a touch too soon for me to invest in Telstra and its industry peers TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC), I certainly think it is worth keeping a close eye on its progress and the industry in general over the next six months. Especially with the TPG-Vodafone Australian merger decision due in the coming weeks.
