Is the Telstra share price a safe haven buy right now?

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.

Could the Telstra Corporation Ltd (ASX: TLS) share price be a contender to act as a safe haven against the volatility the ASX share market is seeing?

During the COVID-19 crash of early 2020, the Telstra share price did not fall as dramatically as many other ASX shares did.

Over the last month, Telstra shares have dropped around 2% while the S&P/ASX 200 Index (ASX: XJO) share price has declined around 6% in that time.

Telstra generates relatively consistent profit and cash flow every month, thanks to the essential nature of its services to Australians.

But inflation and interest rates rising present a different conundrum for investors compared to a global pandemic. Is the telecommunications business an opportunity?

Broker opinions on the Telstra share price

As one of the biggest businesses on the ASX, there are plenty of analysts that look at the company.

One of the most recent ratings comes from the broker Morgan Stanley, with a price target of $4.60 and a buy rating. That implies a possible rise that’s comfortably more than 10%.

One of the reasons for its optimism is that in the US, 5G telco peer T-Mobile is seeing good operational progress with customers quickly taking to fixed wireless home internet. So far, the changing economic environment in the US is not hurting consumer demand for telco services.

Another broker that rates Telstra as a buy is Ord Minnett. The price target is $4.50, also implying more than 10% upside. One of the positives that the broker has pointed out is the potential for the telco to sell more of its telco tower assets.

Recent updates

One of the major ways that investors like to value businesses is by looking at the profit direction.

Telstra is now expecting its profit to start rising after years of being impacted by the shift to the NBN.

A few months ago, the company said in its T25 strategy to FY25 that it’s expecting a compound annual growth rate (CAGR) of mid-single digits for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and a high-teen growth rate for underlying earnings per share (EPS).

In the recent FY22 half-year result, the company reported “strong” mobile growth with EBITDA rising 25%, post-paid average revenue per user (ARPU) rising 5%, and post-paid services increasing by 84,000.

It also reported that underlying EBITDA rose 5.1% to $3.5 billion, while underlying EPS went up 55% to 6.2 cents.

The company said that it is continuing to see growth in the mobile market on the back of its investment in customer-centric plans.

Telstra also boasts that its 5G network is now more than twice the size of Telstra’s nearest competitor, with more than 77.5% of the population covered and almost 2.8 million 5G devices connected to its mobile network.

The business has also made other moves, such as the acquisition of the Digicel Pacific company. Digicel Pacific has 2.5 million customers and leading businesses in PNG, Fiji, Vanuatu, Tonga, Nauru, and Samoa.

Telstra dividend

The board of Telstra has an intention to grow its dividend over time, as earnings and cash flow grow.

At the current Telstra share price, it’s expecting to pay a grossed-up dividend yield of 5.8%.

The post Is the Telstra share price a safe haven buy right now? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Telstra right now?

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More reading

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended T-Mobile US. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended T-Mobile US. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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