Why Telstra (ASX:TLS) shares could be a buy before reporting season

Shareholders have shed many tears for the telco monolith in the past 5 years, but this year has been brighter. Can the company keep it up?
The post Why Telstra (ASX:TLS) shares could be a buy before reporting season appeared first on The Motley Fool Australia. –

Telecommunications giant Telstra Corporation Ltd (ASX: TLS) has disappointed long-term investors in recent years, but shown a glimmer of hope in 2021. Telstra shares have plunged more than 34% in the past 5 years, even after a 25.6% gain this year.

The Wilson Asset Management team certainly thinks the revival this year is justified and is the start of a massive turnaround.

In a memo to clients, portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg revealed the WAM Leaders Ltd (ASX: WLE) fund is currently holding Telstra stocks.

“We believe the telecommunications sector is at the start of a growth phase, following years of headwinds, including narrow NBN pricing margins,” their memo read.

“The mobile market is now in repair, with Telstra the first of its competitors to lift its prices last year, with competitors Optus and Vodafone [TPG Telecom Ltd (ASX: TPG)] following this year.”

The rising prices are a positive indicator the telecommunications market is “behaving rationally”, according to the Wilson trio, and would improve margins for everyone.

“We expect this to materialise in average revenue per user (ARPU) growth in the coming years.”

Watch out for a spike in Telstra shares this results season

The Wilson portfolio managers also loved the $2.8 billion reaped from Telstra’s sale of its mobile towers. This was a price “significantly higher” than the market expected.

“(This) provides further upside for Telstra’s remaining infrastructure assets should they be sold,” the memo read.

“The company will also benefit from international borders reopening, with its overseas roaming services operating at very accretive margins.”

The results season next month could see Telstra shares move, according to the fund managers.

“We see a number of catalysts that we expect to re-rate the share price further, including the company’s results in the August reporting season followed by a refresh of the nearly concluded T22 transformation strategy, which included aggressive cost-saving measures.”

Plus, don’t forget the icing on top.

“Telstra also has a meaningful dividend yield, which we believe will form a large proportion of returns this year relative to previous years.”

The WAM Leaders share price is up almost 15% for this year, and now trades a premium to net tangible assets at $1.58. The listed investment company’s portfolio was up 37% in the 2021 financial year.

The post Why Telstra (ASX:TLS) shares could be a buy before reporting season appeared first on The Motley Fool Australia.

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

Before you consider Telstra, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Telstra wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

More reading

3 ASX shares to win when lockdown ends

WAM Leaders thinks these ASX shares might be buys

Telstra (ASX:TLS) share price struggles as Optus cries foul
Here are 3 of the most heavily traded ASX 200 shares today

2 top ASX dividend shares with BIG yields

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. 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.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!