Is the Transurban Group (ASX: TCL) share price a buy with traffic returning to the roads around Australia’s capital cities?
Life is starting to return to normal around Australia and one of those elements is that road traffic is starting to return.
The last couple of months have been tough for Transurban. There’s a reason why the Transurban share price fell 38% in around a month. Traffic was expected to fall heavily and it did.
In the week of 26 April 2020 Transurban saw a 44% decline of traffic across its entire network because of the coronavirus. But restrictions are starting to lift and schools are opening up again.
Is the Transurban share price a buy?
Since that low on 19 March 2020 the Transurban share price has actually risen 37.6% so it has recovered more than half of the lost ground.
Will it keep going and get back to its pre-coronavirus level? There’s two big factors to consider.
The first is that interest rates are now incredibly low. That should, theoretically, push asset prices up higher than they would have otherwise been. This should help boost Transurban’s fair value share price.
But most importantly – what are the traffic numbers going to be over the next 12 months? Will there continue to be a big reduction of traffic with people working at home? Other drivers may want to save a few dollars and avoid toll roads if they’re being cautious with spending.
Or will life somehow miraculously get back to normal before the end of 2020?
Obviously these considerations are very important for the Transurban share price and traffic is key for the Transurban distribution.
At this stage it’s hard to say which way things are going to go for Transurban and its traffic numbers. That’s why I’m happy to leave it on the sidelines for now.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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