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On Wednesday, UBS analyst Lucy Huang downgraded Telstra (OTC:TLGPY) Corp. shares from Buy to Neutral, adjusting the price target slightly upward to AUD4.60 from AUD4.50. The revision followed Telstra’s Connected Future 30 strategy day, where the company highlighted the increasing demand for its services, its competitive strengths, and a solid track record in execution. Telstra has been focusing on integrating artificial intelligence into its operations and has established new performance KPIs that aim to match the upper quartile of international companies.
Despite these positive developments, Huang expressed caution about the overall industry’s ability to improve Return on Invested Capital (ROIC). Over the past six months, Telstra’s stock has outperformed the ASX by 15%, buoyed by a strong first half of the fiscal year 2025 results and favorable macroeconomic factors. However, Huang noted that there has been no change in the company’s guidance for the full fiscal year 2025.
Telstra is currently trading at a fair value according to UBS estimates (UBSe), with an EV/EBITDA multiple of 7.4 times, aligning with its five-year average. Nonetheless, this represents a 14% premium compared to its European and US counterparts. Huang’s comments suggest a watchful approach, as the market considers whether Telstra can sustain its performance and justify its valuation in the long term.
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