Trump announces trade deal with EU following months of negotiations
On Wednesday, Macquarie analyst Andrew Gillies upgraded Telstra (OTC:TLGPY) Corp. (TLS:AU) stock from Neutral to Outperform, setting a new price target of AUD5.28, up from the previous target of AUD3.93. The upgrade reflects a positive outlook on the company’s financial performance and growth prospects.
Gillies highlighted Telstra’s underlying return on invested capital (ROIC) expansion, which is expected to reach 10% by the fiscal year 2030, attributing this to the company’s operating leverage. He forecasts a mid-single-digit compound annual growth rate (CAGR) in cash earnings per share (EPS) leading up to the fiscal year 2030. According to Gillies, Telstra has multiple options for cost reduction that could further enhance its financial metrics.
The analyst also pointed out the potential for Telstra to implement further capital management strategies. He noted that an improving EPS profile, combined with strong cash generation, could provide the company with opportunities to increase its dividends or initiate buybacks, thereby delivering additional value to shareholders.
Additionally, Gillies mentioned Telstra’s "Network as a Product" (NaaP) initiative as a key factor supporting sales growth. He believes that the company’s improving value proposition will contribute to average revenue per user (ARPU) increases through a mix of pricing strategies, product mix adjustments, and the introduction of new revenue streams.
In summary, Macquarie’s upgraded rating and increased price target for Telstra stock are based on the company’s expected ROIC expansion, cash EPS CAGR, cost-out options, capital management potential, and strategies for sales growth and ARPU increases.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.