What is JP Morgan saying about the Telstra (ASX:TLS) share price?

JP Morgan gives its take on the telecommunications’ company share price.

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Shares in telecommunications giant Telstra Corporation Ltd (ASX: TLS) are inching higher in afternoon trade and are changing hands at $3.97 apiece.

Telstra’s share price bounced off a low of $3.73 on 22 October with authority and are now up 3% for the month. For reference, the benchmark S&P/ASX 200 Index (ASX: XJO) has climbed 0.1% in that time.

Whilst there’s been no price-sensitive information for the company today, analysts at JP Morgan released a note to clients indicating its outlook for the Telstra share price.

What did JP Morgan say?

JP Morgan reckons that Telstra’s drive to be one of Australia’s top energy retailers by FY25 isn’t as appealing as it might sound.

The broker thinks Telstra’s plan is lacking in a few key areas, especially given the markets for household data and energy provision. It states the returns would capture a small percentage of market share, and would only contribute a little over 3% of Telstra’s annual earnings before interest and tax (EBIT).

Nonetheless, in another report released in late October, JP Morgan labels Telstra as “the best placed in the Australian mobile market” that is early to the game and well diversified.

And even in view of the commentary, it retained its overweight rating on the share in the note today.

For instance, it said the company’s “headstart on the rollout of 5G infrastructure should see market share gains of lucrative postpaid subscribers”.

Aside from this, the broker was pleased with Telstra’s acquisition of Pacific telecom provider Digicel. It notes the deal is likely to add another annual EBITDA of $310 million to the company.

It now estimates an FY22 underlying EBITDA of $7.2 billion for Telstra, which is still within the company guidance of $7 billion to $7.3 billion.

Telstra’s share price was well below JP Morgan’s price target of $4.60 at the time, which still implies an upside potential of around 16% at the time of writing.

What are other brokers saying?

Analysts at HSBC also have a $5.20 price target on the share whereas Jefferies has a buy rating and $4.60 valuation as well.

And as The Motley Fool reported earlier today, the team at Morgans also have a buy rating and likes Telstra’s upcoming dividend of 16 cents per share.

In fact, of the 14 analysts or firms covering Telstra identified, 64% have a buy recommendation and bullish direction on their price targets. Hence, JP Morgan is aligned with that sentiment.

Telstra share price last 12 months

In the last 12 months, the Telstra share price has gained 27% after rallying another 33% this year to date. Both of these returns have far outpaced the broad indices.

It has been a fairly smooth run for Telstra shareholders in that time, having really come off a low of $3.06 on 7 May.

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The author Zach Bristow has no positions 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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