Telstra (TLS) hit a 52 week high this week following another broker upgrade based on an improving outlook for mobile and the corporate restructure which MM has been highlighting since initially buying the stock below $3.00 in our Income Portfolio. TLS is now up 23% this calendar year versus the market which is up 11%. As MM consistently says, alpha can be found in many unlikely places, we just need to keep an open mind! There are two main reasons TLS remains positive and on-track to trade to our initial target of $4.
- The mobile market is becoming more rationale: A few years ago, it was a highly competitive space with new entrants competing aggressively. Some of those have fallen over however it’s the larger players like Optus that really matter. In their latest update, Optus highlighted their focus on profitable growth, not growth at any cost: “We’re very focused in Australia in driving sustainable profitable growth…that starts with building momentum in our mobile business”
- Telstra’s sum of the parts is worth more than the whole: The corporate restructure will unlock value and will provide a catalyst for the share price in MM’s view.
MM remains bullish TLS initially targeting ~$4.00
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