Why the Telstra (ASX:TLS) share price zoomed 43% higher in 2021

Telstra’s shares were hot property in 2021…

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The last few years haven’t been easy for the Telstra Corporation Ltd (ASX: TLS) share price and its shareholders.

But that all changed in 2021, with the telco giant’s shares among the best performers on the illustrious ASX 50 index.

During the 12 months, the Telstra share price raced a whopping 43% higher.

Why did the Telstra share price shoot higher in 2021?

There were a number of catalysts for the rise in the Telstra share price in 2021. These include its solid result in FY 2021, the announcement of asset sales, the acquisition of Digicel Pacific, and the unveiling of its T25 strategy.

It was arguably the latter that got investors most excited. After years of earnings declines and dividend cuts, the telco giant believes its T25 strategy will drive growth over the coming years.

Telstra’s CEO, Andy Penn, explained that T22 was based on transforming the company, whereas T25 will be about driving growth.

Mr Penn commented: “T25 marks our transition from transformation to growth, from a strategy we had to do, to a strategy we want to do to focus on growth. It is a strategy that builds on the strong foundations we have built over the last three years and remains focussed on what matters most – our customers, our people, our shareholders and on supporting the creation of a vibrant digital economy for Australia.”

According to the update, Telstra is aiming to deliver sustained growth and value by targeting mid-single digit underlying EBITDA and high-teens underlying earnings per share (EPS) compound annual growth rates between FY 2021 and FY 2025.

Supporting this growth will be the company’s cost reduction plans and its 5G network. In respect to the former, Telstra is aiming to make $500 million of net fixed cost outs between FY 2023 and FY 2025 while still investing in its growth. Whereas for the latter, the telco expects to provide ~95% of the Australian population with 5G coverage by FY 2025. Combined with its superior network, management expects this to underpin mobile services revenue growth.

Can Telstra beat the market again in 2022?

The good news for investors is that one leading broker still sees a lot of value in the Telstra share price.

A note out of Ord Minnett from last week reveals that its analysts have a buy rating and $4.85 price target on its shares. With Telstra’s shares currently changing hands for $4.26, this implies potential upside of 14% over the next 12 months.

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 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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