Things have gone from bad to worse for the TPG Telecom Ltd (ASX: TPG) share price. Its shares have slumped almost 40% since its merger between TPG Telecom Ltd and Hutchinson Telecommunications Ltd on 30 June 2020.
However, broker Morgans thinks the stock could be a 'buy the dip' opportunity.
Image source: Getty Images
Why has the TPG share price underperformed?
The TPG share price performance has been keeping pace with its competitor, Telstra Corporation Ltd (ASX: TLS). It wasn't until Telstra announced its plans in March to restructure its business that a divergence in performance began to emerge.
Despite TPG's solid financial performance, the company's management has undergone a series of significant changes.
The TPG share price took a 7% dive to $6.40 on 26 March after the announcement of its 2020 annual report and the resignation of founder David Teoh.
Brokers were quick to critique the founder's resignation.
Credit Suisse said at the time that the resignation created a potential "share overhang". This is because David Teoh, his family and associates hold a 17.1% interest in TPG Telecom, with 80% of the holding subject to an escrow until the end of June 2022. The broker notes that his exit could see other shareholders exit their holdings as well.
To add further insult to injury, the TPG share price took another 5.50% fall to $5.25 on Thursday after the resignation of CFO Stephen Banfield.
Why the TPG share price could be a buy
Morgans has retained an add rating for TPG shares on Friday. The broker views the short-term share price weakness as a buying opportunity but reduced its target price from $8.11 to $7.17 to adjust to capex forecasts.
TPG has not provided any concrete figures regarding year to date performance. However, in its chairman's address to shareholders presentation on 6 May, management said that "we are tracking well against our forecast for the year". Morgans assumes that the company is broadly comfortable with FY21 earnings.
The TPG share price is fetching $5.45 at the time of writing, up 4%.
