The Telstra Corporation Ltd (ASX: TLS) share price could be great value at the current level.
That's the view of one of Australia's leading brokers, which has just elevated the telco giant to a coveted list.
Telstra share price offers great value
According to a note out of Morgans, its analysts have put the company's shares on its best ideas list in October.
The broker's best ideas are those that its analysts believe offer the highest risk-adjusted returns over a 12-month timeframe. They are supported by a higher-than-average level of confidence and are its most preferred sector exposures.
The note reveals that Morgans has put the telco giant on its list with an add rating and $4.60 price target.
Based on the current Telstra share price of $3.84, this implies potential upside of 20% for investors over the next 12 months.
Morgans is also forecasting a 16.5 cents per share fully franked dividend in FY 2023. This equates to an attractive 4.3% dividend yield.
Why did the broker add Telstra to its best ideas list?
The broker made the move on the belief that the market is undervaluing the Telstra share price on a sum of the parts basis. It also believes the recent Optus hack could be a boost to its business. Morgans commented:
After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote on Telstra's legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA.
However some of TLS's high quality long life assets like InfraCo are worth substantially more, in our view. We don't think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.
