Bell Potter upgrades Telstra stock to 'buy'
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The news: Bell Potter has upgraded Telstra to a ‘buy’ rating citing its increasingly reasonable valuation compared to peers.
The numbers: Despite the rating upgrade, the Bell Potter analyst Chris Savage left his 12-month price target unchanged at $4.25 and kept forecasts steady.
Shares in the company were up 0.26% at $3.80 in early trading on the ASX today. However, over the last 12 months Telstra's shares have fallen 6.86%.
Telstra's FY25 price earnings ratio stands at less than 20 times compared to the average of around 23 times for other comparable S&P/ASX 20 stocks.
The context: Bell Potter said while the growth outlook for Telstra is not as good as comparable companies, it has forecast mid-to-high single digit earnings per share growth in FY25, expects to have a good dividend yield of 5% fully franked in FY25 and has the option of selling part or all of its infrastructure business to unlock value.
Telstra reported underlying earnings of $4 billion in the first half.
What they said: “There is perhaps a lack of catalysts to drive a re-rate of the multiple … but on the flip side there is little risk in our view of the company not achieving its FY24 guidance, which implies a better H2 result relative to H1,” the analyst said in a note.
The source: Bell Potter
