The Telstra Corporation Ltd (ASX: TLS) share price is an interesting one considering the telecommunications business has a reputation for being a defensive ASX share.
Why could it offer more stability than the S&P/ASX 200 Index (ASX: XJO)? Because its customers pay regularly, such as monthly or quarterly. Relatively consistent revenue can mean fairly consistent net profit after tax (NPAT) and cash flow. That's the theory anyway.
Certainly, I think people will keep paying their phone bills over other spending categories.
So, how has the Telstra share price performed in recent times?
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Recent performance
Since the beginning of 2022, the Telstra share price has declined by 9% while the ASX 200 has declined by 10.9%. The telco takes the win here, slightly.
Looking at the performances in the first quarter of FY23, Telstra shares were flat. The ASX 200 dropped by 1.4%. Another win for the telco.
In October, the Telstra share price is down 0.26%, while the ASX 200 is up 4.5%.
I'd suggest that much of the movement in share prices we've seen for Telstra — and many other ASX shares — could be pinned on inflation and rising interest rates. These two factors spark uncertainty. But, in terms of the telco being defensive, it did manage to provide less downside than the ASX 200.
What could have affected the Telstra share price?
Investors usually judge a company by looking at its net profit, growth, and outlook of the business.
The telco told investors that, on a guidance basis, the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 8.4% to $7.3 billion, underlying earnings per share (EPS) increased 48.5% to 14.4 cents, and free cash flow went up 5.9% to $4 billion. Total income dropped 4.7% to $22 billion.
A particular highlight was that the mobile business saw EBITDA growth of 21.2%. Meantime, postpaid handheld average revenue per user (ARPU) grew 2.9% with 6.4% mobile services revenue growth. Telstra also added 155,000 net retail postpaid handheld services.
In FY23, total income is expected to be between $23 billion to $25 billion. Underlying EBITDA is expected to be between $7.8 billion to $8 billion.
One of the most interesting things to me about the Telstra share price is that the company has announced it's going to increase prices in line with CPI inflation. Not only can it grow revenue through 5G services, but it can grow its ARPU by increasing its prices. Indeed, it could increase prices each year.
Brokers rate the Telstra share price as a buy
A number of brokers rate the telco as a buy.
For example, Morgan Stanley has an overweight rating on the business, with a price target of $4.60. It thinks that Telstra can benefit from subscribers who move to Telstra after the Optus data hack.
Morgans rates Telstra shares as add. One of the reasons it's optimistic is that the telco's assets may be undervalued. The broker has a price target of $4.60. Telstra shares closed trading on Friday at $3.84 apiece.
