The Telstra Corporation Ltd (ASX: TLS) share price has been amongst the best performers on the ASX 200 in 2019.
A 0.5% gain to $3.20 in early trade means that the telco giant's shares have now pushed around 13% higher since the start of the year.
The good news for shareholders is that one leading broker believes there are further gains to come in 2019.
According to a note out of Deutsche Bank, it has initiated coverage on the company with a buy rating and $3.70 price target. This price target implies potential upside of over 15.5% for its shares over the next 12 months excluding dividends.
The broker is less bullish on rival Vocus Group Ltd (ASX: VOC). It has placed a hold rating and $3.10 price target on its shares.
Why is Deutsche Bank bullish on Telstra?
Due partly to the NBN rollout, the arrival of 5G, and the proposed Vodafone-TPG Telecom Ltd (ASX: TPM) merger, the broker notes that the Australian telecommunications sector is going through a significant transformation at present.
It believes these changes can be favourable for Telstra and puts it in a position to generate high levels of free cash flow.
So much so, the broker not only believes that this makes its dividend sustainable, but there is even a chance that additional funds could be returned to shareholders through other capital management initiatives.
What about Vocus?
While the broker appears reasonably positive on Vocus' turnaround, it isn't a fan of its current valuation. According to the note, Deutsche believes that the market has already priced in a successful turnaround.
As a result, the broker appears concerned that its shares could come under pressure if the turnaround isn't successful.
Should you invest?
Whilst I think Telstra's shares are attractively priced, I would suggest investors wait for its half year results release next week before considering whether to make an investment.
I'm not yet convinced that its dividend is sustainable, but I suspect we will know for sure next week.
