Should I load up on Telstra shares at $4 each?

Should investors be pouncing on this telco giant's shares right now?

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Key points

  • Telstra shares have pulled back from recent highs
  • A number of analysts see this as a buying opportunity
  • They believe the telco giant's shares could generate double-digit returns over the next 12 months

After peaking at a 52-week high last month, Telstra Group Ltd (ASX: TLS) shares have pulled back and currently sit a touch over the $4.00 mark.

Investors may now be wondering if this has opened up a buying opportunity or if they should keep their powder dry for the time being.

Are Telstra shares a buy at current levels?

If the broker community is to be believed, now would be a great time to pick up Telstra shares.

A good number of brokers have the equivalent of buy ratings on the telco giant's shares with price targets offering meaningful upside.

For example, Credit Suisse, Goldman Sachs, Jefferies, Macquarie, Morgan Stanley, and Morgans are all bullish and expect double-digit gains from its shares over the next 12 months.

What are brokers saying?

Over at Goldman Sachs, its analysts have a buy rating and $4.60 price target on the company's shares. This suggests potential upside of over 13% from current levels.

The broker also expects a 17 cents per share fully franked dividend, which represents a 4.2% yield. Goldman commented:

We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful opportunity to crystalise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.

Whereas over at Morgans, its analysts have an add rating and $4.70 price target. This suggests upside of 16% for Telstra's shares. And with the broker also expecting a 17 cents per share dividend in FY 2023, the total return stretches beyond 20%.

Morgans agrees that asset divestments could unlock value for shareholders. It said:

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.

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 has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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