Telstra Group Ltd (ASX: TLS) stock has languished in 2024 despite the market charging to record highs.
Since this time last year, Australia's largest telco has risen a touch under 2% to $3.86.
As a comparison, the S&P/ASX 200 Index (ASX: XJO) has climbed almost 19% over the same period.
That's a significant underperformance and is despite the telco giant delivering strong full year results in August.
Telstra's results
For FY 2024, Telstra reported a 1% increase in total income to $23.5 billion. This reflects growth across Mobile, International, InfraCo fixed and Amplitel.
Things were even better for its earnings, thanks to the key Mobile business.
Telstra's Mobile earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 9.2% in FY 2024 to $5,026 million. This was due to high margin services revenue growth and cost-outs.
This ultimately led to Telstra recording a 3.6% lift in underlying EBITDA to $8.2 billion and a 7.5% jump in underlying net profit after tax to $2.3 billion.
Yet despite this, Telstra stock is down in the dumps. So, should you be buying? Let's see what a couple of leading brokers are saying.
Is it time to buy Telstra stock?
All but one of the major brokers currently have the equivalent of buy ratings on Telstra's shares with price targets suggesting that upside of 10%+ is possible.
One of those brokers is Bell Potter, which has a buy rating and $4.30 price target on the company's shares. This implies potential upside of 11.5% for investors. It recently 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.
This sentiment was echoed by analysts at Goldman Sachs. They have a buy rating and $4.35 price target on Telstra stock, which implies potential upside of almost 13%. The broker said:
Although at a headline level, Telstra valuation appears relatively full (vs. peers and vs. 10Y yield), we note: (1) Adjusting out NBN recurring payments (a unique asset), Telstra trades at a much more compelling multiple; (2) Although its yield spread is compressed vs. history, when factoring dividend growth this is more attractive. Hence, in an uncertain 2024 we rate Telstra Buy.
