Telstra Corporation Ltd (ASX: TLS) shares have jumped slightly more than 5% this month, following an easing of concerns about Chinese and European markets.
However, despite the telco's shares trending back towards $6.50, one investment bank has slapped a 12-month price target on Telstra's shares which is significantly less than its current market price.
According to Dow Jones Newswires, investment bank UBS, recently upped its price target on Telstra shares from just $4.60 to $5.30, and kept its 'sell' recommendation. That's a huge 18% discount to today's price.
While I cannot comment on their reasoning, there are certainly plausible scenarios that could result in Telstra's share price falling hard.
Indeed, Telstra is currently the focal point of many Australian investors seeking to escape low-interest rates by buying reputable dividend stocks. A rise in official interest rates could stunt that demand, however unlikely that may be.
Telstra is also embarking on a promising overseas expansion strategy. Therefore, should its international growth strategy grind to a halt, more analysts may be prompted to place a sell rating on the company.
What is Telstra worth?
The good thing about sharemarket investing is that analysts can have varying opinions on value, depending on their assessments of the risks and potential of a business.
Long-term investors also have the added benefit of time. That is, if you're investing for 10 years or more why does it matter what the share price is after one year?
Personally, I doubt we'll see Telstra's share price fall to just $5.30 anytime soon. However, if it does, I'll likely start queuing up to buy shares because my fair value estimate for Telstra is between $6 and $6.50.
Indeed, until its price drops closer to $5.00, I'd rate Telstra as a hold.
A better dividend stock idea than Telstra
