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.
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%.
