The iconic telco’s share price is edging higher after an extended rocky patch.
The post How has the Telstra (ASX:TLS) share price jumped to a 52-week high appeared first on The Motley Fool Australia. –
The Telstra Corporation Ltd (ASX: TLS) share price has been having a tough time of late. Shares in the Aussie telco have slid a long way from their $5.80 per share valuation of July 2016.
5 years on, investors are starting to see some positive signs again. In fact, while the S&P/ASX 200 Index (ASX: XJO) was breaking records on Friday, there was one ASX 200 share also quietly climbing higher.
Why is the Telstra share price at a 52-week high?
One of the big issues plaguing Telstra in recent years has been the rollout of the NBN across Australia. The NBN has created intense competition given the significant government support it’s received. Its rollout forced a strategy rethink at Telstra.
Falling profitability and a need for change have weighed on the Telstra share price. Shares in the Aussie telco slumped to just $2.66 per share in October 2020 as investors feared further dividend cuts from the historically blue-chip income share.
But the recent market rebound has helped lift the Telstra share price higher over the last month. Telstra shares closed up 1.7% at $3.58 per share on Friday afternoon, with a $42.6 billion market capitalisation.
The gains have come despite Telstra making no market announcements since 23 April. Shares in rival telco TPG Telecom Ltd (ASX: TPG) also jumped 1.6% on Friday despite no announcements on its end.
There’s no doubt the telecommunications sector has performed strongly in recent times. That momentum could be a factor in the latest Telstra share price gains we’re seeing.
There’s also increasing concern from some investors about the impacts of inflation. Rising inflation would in theory devalue tomorrow’s dollar relative to today’s. In effect, this decreases the real value of future profits from market darlings that promise future earnings but deliver little today in the way of income (or dividends).
As a result, some investors are starting to think about a value rotation strategy. That’s where a portfolio is tilted more towards value stocks that pay dividends today in line with the ‘bird in the hand’ theory. That’s to say: a dollar in the bank today is worth more than potential future profits tomorrow.
Whatever the reasons at the moment, the Telstra share price is certainly a beneficiary. Shares in the telco closed at a 52-week high on Friday as the benchmark ASX 200 index continued to push higher.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.