Is today a good day to buy the Telstra Corporation Ltd (ASX: TLS) share price?
US politics, trade wars and the ongoing Brexit dramas has caused the All Ordinaries (ASX: XAO) to drop 0.7% by the middle of the day and the Telstra share price has fallen a little more – it's down 0.8% to $3.58.
Since the early part of August the Telstra share price has fallen by almost 10%, so it's not being the high-performing blue chip that it was earlier in the year.
But I'll give it some credit, its share price is up by 30% since Christmas 2018.
I'm not surprised to see that investors are selling down Telstra shares. The FY19 result was not good news. Total income fell by 3.6% to $27.8 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 21.7% to $8 billion and net profit declined 39.6% to $2.1 billion.
Cutting costs, mainly thousands of jobs, and selling assets is a good idea from Telstra mangement but it doesn't solve the revenue side of things. The NBN is causing Telstra major profit difficulties with price competition and the payments from the NBN isn't making up the difference.
Telstra has lost its powerful monopoly on the infrastructure and I just don't see how Telstra can replace that market position until 5G comes along. It may be able to gain some advantage back with pricing power and faster services. It's possible that Telstra's 5G offering could actually replace the NBN entirely with a wireless broadband option for customers.
5G could also unlock other revenue generators if the economics are right, such as automated cars and other Internet of Things services.
Foolish takeaway
Telstra is getting better value as the days go by, but it's valued at 17x FY20's estimated earnings but earnings are expected to keep dropping in FY20 and FY21 because of the NBN headwinds. I'm not a buyer of Telstra shares.
