Telstra Group Ltd (ASX: TLS) has received favorable feedback from analysts following the release of its FY 2024 results. The telco giant's performance has prompted a reassessment of its stock value, with analysts highlighting several positive aspects and potential opportunities.
Telstra's FY 2024 results have been met with enthusiasm by the analyst community. The ASX communication stock’s robust performance and forward guidance have led to a positive reassessment of its stock, reflecting confidence in its future prospects.
Analyst Insights
Following the release of the full-year results, several analysts have upgraded their views on Telstra's stock. For instance, a notable increase in the price target has been observed, with expectations for the share price to potentially rise by around 9% from its current level of $3.95. This positive outlook is supported by an anticipated fully franked dividend yield of 4.8% for FY 2025, which enhances the overall potential return to nearly 14%.
Analysts have praised Telstra for its strong performance, particularly its results and guidance for FY 2025. The company's financial metrics and operational efficiencies have led to a revision in the price target, reflecting an improved valuation. The reduction in the discount applied to the price-earnings (PE) ratio valuation, from 15% to 10%, underscores the positive impact of the results and the potential for significant free cash flow uplift in FY 2026.
Key Positive Aspects
Several factors contribute to the positive sentiment surrounding Telstra:
- Strong Earnings Performance: Telstra has demonstrated strong earnings in its fixed Communications and Small Business (C&SB) segment. Notably, the National Broadband Network (NBN) margins reached 14% in the second half of FY 2024, benefiting from recent price increases and ongoing cost initiatives.
- Revenue Growth: The company's prepaid mobile revenues showed a 5% increase, indicating effective management of its mobile portfolio and supporting overall mobile service revenue stability.
- Earnings Per Share (EPS) Revisions: Adjustments to EPS forecasts for FY 2025 reflect an expected growth in dividends per share, with projections indicating a rise to 19 cents. This is supported by the absence of restructuring charges, which were accounted for in FY 2024.
- Free Cash Flow (FCF) Growth: Telstra’s strong underlying free cash flow growth is anticipated to continue, with projections indicating a rise from approximately $2.8 billion in FY 2025 to $4.1 billion by FY 2027. This growth is expected despite a decrease in strategic investments over time.
The positive response from analysts highlights Telstra Group Ltd. as a company with strong performance metrics and promising future prospects. With an increased price target and a favorable dividend yield forecast, Telstra's stock appears well-positioned for potential gains in the coming year. The company's robust earnings, revenue growth, and free cash flow outlook contribute to a strong overall valuation and optimistic future projections.