The Telstra Group Ltd (ASX: TLS) share price could be great value at the current level.
That's the view of analysts at Goldman Sachs, which remain very positive on the telco giant.
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What is Goldman saying about Telstra?
Goldman Sachs notes that the Australian telco sector returned to positive top-line growth during the first half of FY 2023 following an extended period of declining revenue. Pleasingly, the broker expects this to continue thanks to mobile. It commented:
We remain bullish on near-term mobile revenues following 1H23 results and mgmt. meetings, underpinned by ongoing price rises, roaming and accelerating subscriber growth (albeit prepaid skewed). […] Industry feedback suggests that mobile rationality is set to continue, with the only potential risk (in our view) to further pricing increases, if TLS/Optus postpaid sub growth was to decline for an extended period.
And while the sector is expected to face inflationary pressures, the broker believes that Telstra is well-placed to manage the situation. It commented:
We expect the sector to continue facing inflationary pressures, impacted by mandated wage increases (TPG +4.5% CY23E growth incl. super, TLS +2.5%) alongside higher energy and equipment (opex/capex) costs.
To mitigate these headwinds, operators have a range of cost out programs in place. These include (1) Telstra's $500mn net cost out program across FY22-25, with aspirations for a small reduction in FY23 opex. Although this is now more challenging vs. when the target was set in Sept-21, we believe that it is consistent with global peer programs (VZ/BT/VOD) with media reports recently suggesting TLS is looking to accelerate this program.
Where is the Telstra share price heading?
According to the note, Goldman has reiterated its buy rating and $4.60 price target on the telco giant's shares.
Based on the current Telstra share price of $4.16, this implies potential upside of just over 10.5% for investors over the next 12 months.
And with Goldman expecting a 17 cents per share dividend in FY 2023, which equates to a 4.1% yield, the total potential return stretches to almost 15%.
