Telstra Corporation Ltd (ASX: TLS) has seen a significant correction to its share price over the past few months, declining by around 21% since early February. Does this now place Australia’s largest telecommunications provider in the buy zone?

Strong continued demand for telco services

Although Telstra’s share price fall has been in line with many other S&P/ASX 200 Index (ASX: XJO) listed shares, I don’t believe the sharp sell-off was fully justified.

While many ASX listed companies have seen a decline in demand for their products or services, over the past few months, Telstra’s broadband and mobile services are proving to be essential to both businesses and consumers throughout the coronavirus crisis. This has helped with strong continued demand. There has been a sharp increase in fixed broadband bandwidth with more Aussies working from home, people keeping in touch with family and friends online and staying entertained through streaming media services like Netflix.

T22 strategy still on track

In a market update in March, Telstra revealed that it still appears to be on track to achieve most of the goals it had put in place as part of its T22 strategy, which includes reducing underlying fixed costs by $2.5 billion annually by the end of FY22. Telstra also announced that it would move forward capital expenditure initiatives, from the second half of FY 2021 into the calendar year 2020, to increase its overall network capacity and to accelerate the rollout of its 5G network.

In fact, Telstra was actually part of a small group of ASX 200 companies which were recently able to reaffirm their guidance in light of the coronavirus impact. However, the telco provider did acknowledge in its March update, that it expects both free cash flow and EBITDA for FY2020 to be at the bottom end of its guidance range.

In addition, the defensive nature of Telstra’s telecommunications business model, the continued demand for its services throughout the crisis and its strong free cash flow positions it well to maintain its current dividend of 16 cents per share. On current prices, Telstra pays a trailing fully franked dividend yield of 3.24%.

Foolish takeaway

I believe that Telstra was, to some degree, unfairly caught up in the wider market sell-off triggered by the coronavirus crisis. I feel that long-term, focused investors are presented with a fairly good buying opportunity after its recent market correction. Telstra’s fundamentals remain solid and Australia’s largest telecommunications provider appears reasonably placed for long-term growth over the next five to 10 years, driven by its market-leading position in the rollout of 5G services. I currently prefer it over its other rivals such as Optus, Vodafone-TPG and Vocus Group Ltd (ASX: VOC).

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Motley Fool contributor Phil Harpur owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Telstra share price down 21% since February. Is it now in the buy zone? appeared first on Motley Fool Australia.

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This month I have been looking at what would have happened if you had invested $10,000 into the IPOs of some of the most popular ASX shares.

The last one I wrote about, which can be found here, was the Kogan.com Ltd (ASX: KGN) IPO.

Spoiler alert. The ecommerce company’s shares have been very strong performers since their IPO in June 2016.

Today I thought I would turn my attention to the Appen Ltd (ASX: APX) IPO.

The Appen IPO.

Appen is a leading provider of language technology data and services. It provides or improves data that is then used for the development of machine learning and artificial intelligence products

Its shares landed on the ASX boards just over five years ago in January 2015. The company raised $15 million at an offer price of 50 cents per share, which gave it a market capitalisation of approximately $47.3 million. This means that a $10,000 investment would have got you $20,000 shares at its IPO.

Management told investors that the funds raised would help it “take advantage of, and grow with, the recent acceleration of devices and technology that interact with humans on human terms and advances in mobile communications and social media that are driving unified communication in any language and across languages.”

Stellar growth.

Well, management certainly delivered on its prospectus promises and more.

Since its IPO Appen has gone from strength to strength, culminating in the company delivering revenue of $536 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) of $101 million in FY 2019.

But it isn’t stopping there. Last month Appen released a market update which revealed that it remains on course to achieve its FY 2020 guidance despite the pandemic. It expects underlying EBITDA in the range $125 million to $130 million, which represents a year on year increase of 23.8% to 28.7%.

The high end of its EBITDA guidance is a massive 175% greater than its market capitalisation at listing. I believe this demonstrates just how quickly the company has grown.

Unsurprisingly, this has led to its shares rising very strongly since its IPO. At the time of writing they are changing hands for $30.59, which is within sight of their all-time high of $32.00. This gives it a market capitalisation of almost $3.75 billion.

Which means that the 20,000 shares you would have picked up at Appen’s IPO now have a market value of approximately $612,000.

Overall, I believe this demonstrates how rewarding it can be to invest in shares with quality business models, strong growth potential, and talented management teams.

More reading

• Why this ASX infrastructure company could help protect your portfolio in a downturn
• 5 things to watch on the ASX 200 on Thursday
• These are the latest ASX shares to be downgraded by top brokers
• $2,500 invested in these 3 ASX shares could make you a fortune in 10 years
• How you can get very rich with ASX 200 shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post If you invested $10,000 in the Appen IPO, this is how much you’d have now appeared first on Motley Fool Australia.

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