Is the Telstra Corporation Ltd (ASX: TLS) share price a good buy right now?
In the middle of February 2021 Telstra shares climbed as high as $3.32, but it has since dropped back down to $3.10. Does that mean it's worth thinking about as a buy?
What was the Telstra report like?
Telstra said that on a reported basis, total income for the six months fell 10.4% compared to the prior corresponding period to $12 billion, while net profit after tax (NPAT) declined 2.2% to $1.1 billion.
Reported earnings before interest, tax, depreciation and amortisation (EBITDA) dropped by 14.7% to $4.1 billion. After adjusting for lease accounting on a like for like basis, EBITDA fell by 11.7% to $4 billion.
Underlying EBITDA dropped 14.2% to $3.3 billion. The largest two contributors to the decline were the estimated impact of the NBN in FY21 of $370 million and another $170 million from COVID-19. Excluding both of those, underlying EBITDA was essentially flat compared to the first half of FY20.
One part of the business that continues to deliver growth in users is the mobile division.
During the half, Telstra added more than 80,000 postpaid handheld mobile services with good performance from all segments and brands. Telstra also added more than 46,000 prepaid handheld users and more than 163,000 wholesale mobile services across prepaid, postpaid and internet of things services.
However, mobile revenue declined due to lower hardware sales and the impact on international roaming due to COVID-19 impacts. In the COVID-19 crash, the Telstra share price dropped down to just above $3. However, the lowest point over the last 12 months was $2.68 at the end of October 2020.
How is 5G going?
The telco said that it continues to extend its 5G leadership, with its networking expanding to cover more than 50% of the Australian population and delivering coverage to more than 100 cities and towns across the country. One million 5G mobile devices are now connected to Telstra's network. The company also boasted about achieving a world-first with a download speed of greater than 5Gbps on a commercial network using the mmWave spectrum.
Costs and going digital
The company said that its consumer and smaller business digital sales increased to 40% of Telstra's transactions. It also said that 70% of service interactions were also handled digitally.
Telstra said that it continues to work on lowering costs. It reduced its underlying fixed costs by a further $201 million, or 7%. The company also increased its productivity targets to $450 million in FY21 and from $2.5 billion to $2.7 billion by the end of FY22. Around $2 billion has already been delivered.
It also announced that it intends to transition to full ownership of its branded retail stores across Australia, to enable Telstra to keep pace with the digital economy.
Telstra dividend
The Telstra board decided to pay a dividend of 8 cents per share, with guidance for the full year dividend to be 16 cents per share. It currently has a grossed-up dividend yield of 7.4%.
Is Telstra a buy at this share price?
The company is now expecting total income to be between $22.6 billion to $23.2 billion, whilst underlying EBITDA is expected to be between $6.6 billion to $6.9 billion.
In FY22 it's aiming to grow underlying EBITDA by mid to high single digits, then achieve $7.5 billion to $8.5 billion of underlying EBITDA in FY23.
Broker Credit Suisse has a Telstra share price target of $3.85 and rates it as a buy. However, Morgan Stanley only has a price target of $3 for Telstra.
