The Telstra Corporation Ltd (ASX: TLS) share price has been a very strong performer in 2021.
Since the start of the year, the telco giant's shares are up almost 20%.
Can the Telstra share price climb even higher?
The good news is that one leading broker still believes the Telstra share price has a lot further to run from here.
According to a note out of Goldman Sachs this morning, the broker has retained its buy rating and lifted its price target to $4.20.
Based on the current Telstra share price, this implies potential upside of 16.5% over the next 12 months excluding dividends. And if you include the 16 cents per share fully franked dividend the broker is forecasting, this potential return stretches to over 21%.
What did Goldman say?
Goldman Sachs is bullish on the Telstra share price largely due to its belief that the key Mobile business is well-placed for growth.
Its analysts commented: "We have high conviction on the quantum of mobile market repair that is occurring in Australia, along Telstra's ability to grow subscribers and ARPU across FY21-23E. Based on our detailed analysis, we estimate that Telstra could potentially achieve a postpaid ARPU > A$53/sub/m in FY23 (vs. $46 in 1H21) which is c.6% ahead of Visible Alpha Consensus Data expectations."
Goldman believes there are a number of reasons why this is achievable. This includes deferred 5G prices rises impacting ~30% of subscribers, rational market behaviour, and international roaming recovery.
Overall, the broker notes that this underpins its $7.8 billion underlying EBITDA estimate for FY 2023, which is 4% ahead of the consensus estimate but well within Telstra's $7.5 billion to $8.5 billion aspiration.
What else did it say?
Also potentially giving the Telstra share price a lift in the coming years could be the introduction of inflation-linked pricing. Goldman sees opportunities for Telstra to follow the lead of UK telcos that have done this recently.
It explained: "We also consider whether the AU telco market has capacity to introduce inflation linked pricing across fixed & mobile plans, potentially in response to the recent NBN pricing proposals that has a CPI plus component to access pricing."
"We believe that should Telstra, as the incumbent, introduce inflation-linked pricing, the industry would likely follow, which could drive sustained revenue growth in an industry that has historically seen pricing deflation."
"This would be consistent with what was launched in the UK in 2020, where operators are implementing +4.5% price rises in early 2021 (CPI + 3.9%). On a recent earnings call, VOD also noted it was planning on launching inflation-linked pricing across Europe, given it was well-received in the UK," it added.
