The Telstra Corporation Ltd (ASX: TLS) share price has dipped over the past week after reaching a new 52-week high recently. Telstra shares have had a rocketing 2019 so far, climbing from $2.77 at the turn of the year to $3.80 at the time of writing, a YTD rise of 37% (not including the 8 cents per share dividend that was paid in March).
Telstra shares hit the new 52-week high of $3.91 about two weeks ago, the highest level since August 2017, but the shares have now pulled back to around the $3.80 mark where they sit today. So is this pricing pull-back a buying opportunity?
A Telstra refresher
Telstra is Australia's largest telco and (as many older investors probably remember) used to be a government-owned business. The Telstra of today is a vastly different beast though, with many of the monopolistic characteristics of the company that allowed its formerly market-beating dividend now gone by the wayside.
It was the ending of Telstra's generous dividend that prompted a share price collapse between 2015 and 2018, when Telstra shares dropped from about $6.60 in February 2015 to an all-time low of $2.71 last year. Investors got royally spooked when the NBN punched a gigantic hole in Telstra's earnings (from which it is still recovering).
Telstra CEO Andy Penn unveiled a radical $2.5 billion cost-cutting plan (named T22) to combat Telstra's falling earnings and is currently in the process of rolling out this program. T22 involves big staffing cuts, product simplification and the digitalisation of many of Telstra's services. This program, as well as other fortuitous events like the ACCC preventing the merger of competitors TPG Telecom Ltd (ASX: TPM) and UK-based Vodafone, has helped restore investor confidence in Telstra and has largely been responsible for the resurgence of TLS shares.
Is Telstra a buy?
I remain bullish on Telstra shares – I think that the company has successfully positioned itself to thrive in the post-NBN world and, with the T22 plan and Telstra's plans to build its 5G network, the future is looking positive. As a company, I think Telstra has a valuable asset in its brand – Telstra is (in my opinion) by far the most trusted name in Australian telecommunication, and we can see this with Telstra's telco market share being close to or over 50%.
As for the share price, I feel like Telstra is close to being fairly valued by the market at current prices, with a 4% dividend to boot. I don't see a repeat of the near-40% gain going forward, but you could definitely do a lot worse and I believe Telstra is the best ASX telco stock if you want exposure to this space.
