The Transurban Group (ASX: TCL) share price is down 3.82% this year. But is the Aussie infrastructure group in the buy zone?
What’s happened to the Transurban share price?
Transurban hit a new 52-week high of $16.44 per share in mid-February prior to the coronavirus pandemic response kicking in. Following the implementation of widespread lockdown restrictions, the Aussie toll road operator’s shares fell to a 52-week low of $9.10 on 23 March. But are they headed higher now?
The Transurban share price has rebounded strongly and is now up more than 40% since mid-March.
Normally, I would consider toll roads as delivering non-cyclical earnings. However, the nature of the pandemic has forced Aussies to stay home. This has reduced traffic (and revenue) for operators like Transurban.
It has also spooked investors, sending the Transurban share price plummeting in late February and throughout most of March.
Is Transurban’s value set to soar?
Things are looking up for the Aussie infrastructure group with the easing of restrictions. Given the S&P/ASX 200 Index (ASX: XJO) has slumped 13.60% lower, Transurban is outperforming by nearly 10% this year.
This optimism could push the Transurban share price higher, boosting its market capitalisation beyond $39.22 billion.
I think one big tailwind for Transurban will be the way in which we adjust to life as COVID-19 restrictions are eased. Governments are trying to reduce public transport numbers amid fears large numbers of people in close contact could spark a second wave of the pandemic.
This should result in more people driving to work and, therefore, using Transurban’s roads. That’s good for earnings but it’s not as clear cut as it may seem.
Transurban operates 18 roads and projects across Australia and North America. This means there could still be a substantial earnings hit depending on how each region manages the easing of restrictions.
So whilst there are some strong, potential tailwinds for the Transurban share price in 2020, I feel there could be a few more ups and downs on this particular rollercoaster until the August earnings season.
The Transurban share price could be right in the buy zone. I think it’s a speculative buy at $14.34 per share, but it does have the potential to provide both income and growth to a diversified portfolio.
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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 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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