Is the Telstra share price a buy after its recent pullback?

Telstra Corporation Ltd (ASX:TLS) shares are down 3% since last week. Is this a buying opportunity?

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If you already hold Telstra Corporation Ltd (ASX: TLS) shares, you are probably a very happy investor at this point. Shares of the ASX telco giant have risen a massive 38% over the past six months (not including dividends). Telstra reached its highest level since 2017 last week, briefly touching the $3.88 level on Friday but the shares have since pulled back and this morning Telstra is swapping hands for around $3.77 – about 3% down from the high.

What has been behind the recent surge?

Until about six months ago, Telstra was in something of a sentiment hole – no one wanted to touch the telco after dividend cuts and NBN-induced profit holes rattled retail investors who had grown accustomed to the old glory days of the 7% dividend.

Since Christmas, a number of things have gone Telstra's way and it seems to have lifted the negative sentiment that was surrounding the shares. The ACCC blocked rivals TPG Telecom Ltd (ASX: TPM) and Vodafone from merging, which would have seen a stronger competitor to Telstra on the market. This came after TPG was prevented from building a 5G network after the Federal Government decided to ban Chinese telecom company Huawei from operating in Australia due to security concerns. TPG stated that the Huawei equipment was the only option for the company and it has now abandoned plans to pursue 5G. As Telstra is investing heavily in its own 5G network (one of the reasons its dividend was cut), this was more good news for investors and has contributed in pushing Telstra shares back up towards the $4 mark.

So is this a buying opportunity?

After the last six months, I think there is limited upside in the Telstra share price over the short-term as the market is now pricing Telstra fairly. However, Telstra is still a dominant telco with a sizeable brand moat and is well placed to take advantage of the 5G future in Australia. In my opinion, it's still a good long-term buy and with its current grossed-up yield of 5.7% it makes for a good income stock as well.

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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