Why The Telstra Share Price Has Risen Over 30 Per Cent This Year
- The Telstra Corporation Ltd (ASX: TLS) share price has been an interesting one to watch over the past year.
- Since bottoming out around $2.66 back in October last year, Telstra shares have been on quite the run.
- We also see Telstra shares up 28.4% year to date in 2021 so far, and up 39% over the past 12 months to date.
The share price of Telstra Corporation Limited (ASX: TLS) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction.
A staple of the Australian share market and wider economy, Telstra has performed remarkably well throughout the COVID-19 Pandemic.
Confidence comes from a strong performance in its mobile business, discipline in its cost reduction targets, green shoots in growth businesses and a lessening impact from the NBN.
The T22 turnaround plan, which is wholly focused on cost cutting and money saving initiatives, delivered cost reductions of $2.3 billion AUD, with Telstra on track to deliver its productivity target of $2.7 billion AUD.
Telstra lost over $6 billion AUD in profit over the last decade, with the NBN having a major impact, along with a drop in voice revenues, SMS revenues, global roaming, and general economic pressures.
These issues have put pressure on earnings, dividends and Telstra’s share price which is currently sitting at $3.85. Five years ago, it was just over $5 and has dropped 25% in that time. Its lowest ebb was 2010, when it was trading at just $2.85.
Seems there is now a light at the end of the tunnel. As investors can look forward to positive performance in the future and many brokers think that Telstra Corporation Limited Shares could be a fantastic buy opportunity.
One broker who thinks so is investment bank Goldman Sachs. Goldman last month reaffirmed Telstra shares as a ‘buy ‘, with a 12-month share price target of $4.40. That implies a future potential 12-month upside of roughly 14% on current pricing.
Goldman is bullish on Telstra following the company’s T25 update, which outlined a number of further cost-saving measures Telstra is planning on implementing. It also notes Telstra’s prioritisation of “growing franked dividends over time” as well as an expected share buyback program.
At the current Telstra share price, this telco has a market capitalisation of $44 billion and a dividend yield of 4.15%.
But with the S&P/ASX 200 Index (ASX: XJO) sinking 5.5% over the past few weeks, investors are increasingly looking for ‘safe havens. Pengana Australian Equities Fund, among others has remarked on this with Telstra being a consistent returning telecommunications firm with presence in many markets makes it a secure option for overly cautious investors.
Telstra will always be in competition, at least for the foreseeable future as there is a clear need for their services and products and investors know this.