The Telstra Corporation Ltd (ASX: TLS) share price could be in the buy zone right now. The Aussie telco’s shares have slumped 13.93% lower in 2020 while the S&P/ASX 200 Index (ASX: XJO) is down 17.57% at 5,550.40 points.
That means that Telstra has actually outperformed this year, so, what’s the big deal? These numbers don’t tell the full story.
What’s been happening to the Telstra share price?
The ASX 200 fell to 4,546.00 points on 23 March at the bottom of the bear market. The index has since recovered 22.09% in the months since, but the Telstra share price hasn’t had the same performance.
Telstra shares fell to $3.09 on 23 March after climbing as high as $3.90 in mid-February. But Telstra has since been left behind in the share market rally that followed the crash, and is currently trading back where it was on 23 March. So, has Telstra lost its blue-chip status or is there something else going on?
The only major announcement from Telstra since 23 March was its Foxtel impairment news. Telstra announced a $300 million impairment charge against its 35% stake in Foxtel. The move wrote down the value of Telstra’s stake in the business from $750 million to $450 million.
However, the Telstra share price didn’t fall sharply after the 8 May announcement. That makes me wonder if there’s a secret buying opportunity in the Aussie telco today.
Telstra has a market capitalisation of $36.75 billion right now with a 3.24% dividend yield. The company does have a history of dividend cuts, which makes me wary of investing based on potential income.
So, what’s the good news for the telco?
I think there are plenty of short-term headwinds for the Telstra share price. However, a shift towards more working from home should increase demand for mobile infrastructure in Australia.
Telstra is arguably leading the 5G network race and is well-placed to take on the NBN in coming years. That could mean earnings stabilise and dividends pick back up in the medium to long-term.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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.