Telstra Corporation Ltd. made headlines last week by announcing significant job cuts of up to 2,800 positions as part of cost-saving measures. This decision resulted in one of the largest weekly declines in its share price since 2020 and raised questions about whether this presents an opportunity to acquire a 'blue-chip stock at a discount' or if it signals underlying issues within one of Australia's major market players writtes Wealth Within chief analyst Dale Gillham.
Admittedly, layoffs are rarely a positive sign for a company, and Telstra's move is estimated to cost between $200 million and $250 million. However, there's a silver lining: by making these changes, the company anticipates saving $350 million by the end of the 2025 financial year, resulting in a net positive scenario of $100 million.
If these cost savings are effectively reinvested to foster growth and innovation, this will potentially boost the share price. If this occurs, then Telstra might become an appealing investment option. One thing of note is that Telstra's core mobile business continues to perform strongly, with the company projecting a pre-tax, pre-interest profit of $8.4-8.7 billion for the 2025 financial year.
Turning to the share price, Telstra is currently trading around $3.40. What's noteworthy is its historical resilience at these price levels: despite its 27-year tenure on the ASX, it has only dipped below $3.40 on three occasions, each time rebounding strongly, with gains of at least 17%, and even surpassing 90% in 2015.
So, if Telstra has played its cards right, albeit at the cost of an unpopular decision, then perhaps we're witnessing a 'blue-chip stock at a discount' right now.
However, I would exercise caution and wait for signs of upward price momentum to confirm a new uptrend before you consider it a buying opportunity.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au