Leading broker says Telstra (ASX:TLS) share price is a buy

This telco giant could be a share to buy…

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It has been an excellent year for the Telstra Corporation Ltd (ASX: TLS) share price.

Since the start of 2021, the telco giant’s shares have risen a market-beating 31% to $3.94.

As a comparison, the S&P/ASX 200 Index (ASX: XJO) has risen 12.4% over the same period.

Where next for the Telstra share price?

The good news for the company’s shareholders is that one leading broker is tipping the Telstra share price to extend these gains.

According to a note out of Morgans, its analysts have an add rating and $4.34 price target on the company’s shares.

Based on the latest Telstra share price, this implies a potential return of 10% over the next 12 months before dividends.

And if you include the 16 cents per share dividend the broker is forecasting in FY 2022, the total return on offer increases to just over 14%.

Why is Morgans positive on Telstra?

Morgans has picked out three key reasons for its bullish stance on the Telstra share price. This includes improving trading conditions, its valuation, and positive outlook.

The broker explained: “Three key reasons for our Add rating are: 1) industry dynamics are improving (mobile prices are finally increasing); 2) the SOTP [sum of the parts] for TLS is worth more than the current share price (and steps to release this value are underway); and 3) Underlying EBITDA has returned to growth from 2H21 (and should continue growing over the next few year) which means earnings have found a base.”

The broker also notes that Telstra has its strategy day coming up and sees this as something that could give the Telstra share price a lift. The company is expected to speak about its new T25 plan at the event. Shareholders will no doubt be hoping this strategy is as successful as the T22 plan.

Should you invest $1,000 in Telstra right now?

Before you consider Telstra, you'll want to hear this.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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