ASX expert: Time to buy Telstra shares

This broker reckons Telstra is heading for big gains, and soon.

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Telstra Group Ltd (ASX: TLS) shares have been a fairly disappointing investment for ASX investors in recent months. This ASX 200 telco was flying high only in July last year, reaching new multi-year highs of $4.36 a share.

Alas, today, those highs seem like a distant memory. Telstra shares are currently trading for $3.62. At this pricing, the telco remains a chunky 17% or so off its highs from last July.

Year to date in 2024, Telstra stock is down 8.82%. That stretches to a loss of 16.01% over the past 12 months.

Check that all out for yourself below:

There is one silver lining to this cloud though. Telstra's share price falls over the past 12 months or so have had the effect of lifting the company's storied dividend yield up to an impressive 4.83%. That comes with full franking credits too.

Even so, Telstra shareholders probably aren't a happy bunch right now. But they soon might be if one ASX expert is to be believed.

ASX broker calls 21% upside for Telstra shares

ASX broker UBS sees significant value at the current Telstra share price. According to reporting in The Australian this week, the broker has reiterated a 'buy' rating on the ASX 200 telco, along with a 12-month share price target of $4.40.  

If realised, this would see Telstra shares gain more than 21.5% from their current levels.

This optimism hailed in part from a survey of Telstra customers that UBS conducted. This survey found that "40 [per cent] of respondents were unlikely to make changes to their plans, and only 10 per cent were likely to leave to different networks if prices rise by $5".

That comes from a continuing customer perception of Telstra having the best "network quality" on the market. Telstra also reportedly made improvements when it came to "value for money".

This led UBS to conclude that Telstra's mobile pricing power is "likely intact" and that the company is "still well placed to raise prices".

So good news for Telstra investors. But let's see if UBS is on the money here, or whether Telstra shareholders will have to wait a little longer to see their shares rebound in value.

At the current Telstra share price, this ASX 200 telco has a market capitalisation of $41.83 billion, with a price-to-earnings (P/E) ratio of 20.70.

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. 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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