Are Telstra Group Ltd (ASX: TLS) shares a buy following its full year results this week?
Let's take a look at what analysts are saying about the telco giant after they reviewed its performance.
Are Telstra shares a buy?
The good news is that a number of brokers have responded positively to Telstra's FY 2024 results.
For example, in response to the release, Bell Potter has reaffirmed its buy rating and lifted its price target to $4.30 (from $4.20). Based on its current share price of $3.95, this implies potential upside of 9% for investors.
In addition, its analysts expect a fully franked 4.8% dividend yield in FY 2025. This boosts the total potential return to almost 14%.
Bell Potter was pleased with its result and guidance for FY 2025 and is positive on the future. It said:
We have lowered the discount we apply in the PE ratio valuation from 15% to 10% due to the good result, soft upgrade to guidance and potential material uplift in FCF in FY26. There are no other changes to the key assumptions in our other valuations.
The net result is a 2% increase in our PT to $4.30 which is a 9% premium to the share price and we maintain our BUY recommendation. We believe the stock looks reasonable value on an FY25 PE ratio of c.20x when all of the comps in the S&P/ASX 20 trade on >20x. We also believe the forecast fully franked yield of 4.8% is attractive when CBA's forecast yield is now <4%. The yield is comparable, however, to the other banks but Telstra's dividend is expected to grow whereas the banks are not so much.
What else?
This sentiment is echoed by analysts at Goldman Sachs. In response to the update, the broker has reiterated its buy rating with an improved price target of $4.35 (from $4.30).
This implies potential upside of 10% for Telstra's shares. And just like Bell Potter, it is forecasting a fully franked 4.8% dividend yield in FY 2025. This lifts the total potential return to 15%.
The broker points out a number of positives from Telstra's results. It said:
Key positives: (1) Strong fixed C&SB earnings performance, with NBN margins of 14% in 2H24, and set to benefit from July-24 price rises and ongoing cost-initiatives into FY25; (2) Prepaid mobile revenues were +5% vs GSe, supporting the in-line mobile service revenues as TLS manages its mobile portfolio holistically; (3) Our +4% EPS revisions in FY25, alongside lack of restructuring charges (all landed in FY24) give significant capacity to support DPS growth to 19¢ in FY25; (4) We see a strong underlying FCF growth profile across FY24-27E, with FCFaL & strategic investments growing from c.$2.8bn in FY25 to $3.3bn in FY25 (incl. $250mn NBN payment) and $4.1bn in FY27E (strategic investments decline $400m to $240mn).
