Motley Fool Australia

Will outages make the Telstra share price a buy?

woman sitting glumly in the dark with candles
Image source: Getty Images

Over the weekend, hackers carried out an attack on Telstra Corporation Ltd (ASX: TLS), creating connection issues for some home internet users across Brisbane, Melbourne and Sydney. With so many people working from home, especially in stage four locked down-Melbourne, there is a question of whether this could impact on the Telstra share price and present a buying opportunity.

As a Telstra investor, should you care about the Telstra outages?

In short, I don’t think so. Whilst the news of the hack isn’t a positive for both the business and its share price, over the long term, I don’t think it should have a material impact on the Telstra share price. The main reason for this is that Telstra has indicated no personal data was compromised in the attack.

As technology becomes more accessible globally, and more and more money and data is tied up with technology, it’s reasonable to expect an increase in cyber attacks. This will likely lead to increased cyber security costs for the likes of Telstra, but shouldn’t affect your decision on investing, in my view.

What to consider when buying Telstra shares

Telstra is the market leader in its industry. Because of this, the potential for the company to grow is somewhat limited, despite it having some pricing power from its superior coverage. With that said, competitors such as Optus have done a good job in recent years to increase their coverage nationally.

5G is the 5th generation mobile network meant to deliver faster data speeds, lower latency and a more reliable and available experience. 5G is probably Telstra’s greatest opportunity for growth in the coming years. The technology will support the growth of the Internet of Things (IoT) and thus the number of devices connected to the network. Telstra was the first to enable standalone 5G in Australia.

About the Telstra share price

The Telstra share price currently trades on a trailing price-to-earnings (P/E) ratio of 19x earnings and a dividend yield of 3%, plus franking credits. I’d say the Telstra share price is fairly valued at present. Investors will, however, gain a better insight into the company’s recent operations when it reports FY20 full year results on 13 August 2020.

Foolish bottom line

Telstra’s strong mobile division should benefit from the rollout of 5G, but I don’t expect the Telstra share price to produce life changing growth from here. However, ASX investors who need more regular income should consider the share for its solid dividend yield.

If you are looking to invest in fast growing companies that could increase by 3, 5 or even 10 times in the next decade or so, check out these compelling ASX shares instead.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinions. 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.

Related Articles…

Latest posts by Lloyd Prout (see all)