Is the Telstra share price a safe haven buy right now?

Could shares in the telco giant provide safe harbour during the current volatility?

| More on:
A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Telstra share price has outperformed the ASX 200 over the last month
  • Several brokers currently rate the business as a buy
  • The telco giant is expecting to grow its underlying earnings in the next few years

Could the Telstra Corporation Ltd (ASX: TLS) share price be a contender to act as a safe haven against the volatility the ASX share market is seeing?

During the COVID-19 crash of early 2020, the Telstra share price did not fall as dramatically as many other ASX shares did.

Over the last month, Telstra shares have dropped around 2% while the S&P/ASX 200 Index (ASX: XJO) share price has declined around 6% in that time.

Telstra generates relatively consistent profit and cash flow every month, thanks to the essential nature of its services to Australians.

But inflation and interest rates rising present a different conundrum for investors compared to a global pandemic. Is the telecommunications business an opportunity?

Broker opinions on the Telstra share price

As one of the biggest businesses on the ASX, there are plenty of analysts that look at the company.

One of the most recent ratings comes from the broker Morgan Stanley, with a price target of $4.60 and a buy rating. That implies a possible rise that’s comfortably more than 10%.

One of the reasons for its optimism is that in the US, 5G telco peer T-Mobile is seeing good operational progress with customers quickly taking to fixed wireless home internet. So far, the changing economic environment in the US is not hurting consumer demand for telco services.

Another broker that rates Telstra as a buy is Ord Minnett. The price target is $4.50, also implying more than 10% upside. One of the positives that the broker has pointed out is the potential for the telco to sell more of its telco tower assets.

Recent updates

One of the major ways that investors like to value businesses is by looking at the profit direction.

Telstra is now expecting its profit to start rising after years of being impacted by the shift to the NBN.

A few months ago, the company said in its T25 strategy to FY25 that it’s expecting a compound annual growth rate (CAGR) of mid-single digits for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and a high-teen growth rate for underlying earnings per share (EPS).

In the recent FY22 half-year result, the company reported “strong” mobile growth with EBITDA rising 25%, post-paid average revenue per user (ARPU) rising 5%, and post-paid services increasing by 84,000.

It also reported that underlying EBITDA rose 5.1% to $3.5 billion, while underlying EPS went up 55% to 6.2 cents.

The company said that it is continuing to see growth in the mobile market on the back of its investment in customer-centric plans.

Telstra also boasts that its 5G network is now more than twice the size of Telstra’s nearest competitor, with more than 77.5% of the population covered and almost 2.8 million 5G devices connected to its mobile network.

The business has also made other moves, such as the acquisition of the Digicel Pacific company. Digicel Pacific has 2.5 million customers and leading businesses in PNG, Fiji, Vanuatu, Tonga, Nauru, and Samoa.

Telstra dividend

The board of Telstra has an intention to grow its dividend over time, as earnings and cash flow grow.

At the current Telstra share price, it’s expecting to pay a grossed-up dividend yield of 5.8%.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended T-Mobile US. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended T-Mobile US. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Communication Shares

A woman smiles widely while using an old fashioned hand set telephone with dial.
Communication Shares

Why did the Telstra share price beat the market in FY22?

Telstra's shares were on form in FY 2022...

Read more »

A female executive smiles as she carries out business on her mobile phone.
Communication Shares

Telstra share price rises as Optus folds to inflation

Telstra's shares are having a positive day. Here's why...

Read more »

A woman wearing headphones looks delighted and animated on news she's receiving from her mobile phone that she is holding close to her face.
Communication Shares

The Telstra share price outperformed the ASX 200 in June

The telecommunications giant had a rather healthy finish to FY22.

Read more »

a man sitting at a computer at a desk has a look of anguish and trepidation on his face as he opens his eyes wide and made an aargh type expression with his mouth as his hair stands on end and his tie also stands on end with one part over each shoulder in what is supposed to be a humorous picture of something in a panic.
Communication Shares

Why did the Aussie Broadband share price fall 20% in June?

The telco had a difficult month.

Read more »

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.
Communication Shares

Could July be a good month for the Telstra share price?

Experts have made a positive call on the telco's shares.

Read more »

A woman holds an old fashioned telephone ear piece to her ear while looking unhappy sitting at a desk with her glasses crooked on her nose and a deflated expression on her face.
Communication Shares

Telstra share price slides as Optus exec ramps up calls for TPG deal to be canned

Why is Optus concerned about Telstra's plans with TPG?

Read more »

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.
Broker Notes

What are brokers saying about the Telstra share price?

Brokers are feeling positive about the Telstra share price...

Read more »

Two businessmen high five each other as the Optus plea to ACCC fails to impact the Telstra share price today
Communication Shares

Optus plea to ACCC doing little to these ASX 200 telco shares today

Today's curve ball out of Optus has had no impact on the Telstra share price nor TPG Telecom today.

Read more »