On Monday the Telstra Corporation Ltd (ASX: TLS) share price pushed higher following an update on its proposed legal restructure. You can read about that here and also here.
This led to the Telstra share price climbing almost 1.5% to $3.25.
Is the restructure a good idea?
According to analysts at Goldman Sachs, they believe the restructure is a big positive and expect it to unlock value for shareholders.
In light of this, this morning the broker has retained its buy rating and $4.00 price target on the telco giant's shares.
Based on the current Telstra share price, this price target implies potential upside of 23% for its shares over the next 12 months.
And with Goldman Sachs forecasting fully franked dividends of 16 cents per share for the foreseeable future, the 12-month total potential return on offer here stretches to approximately 28% if you include dividends.
What did Goldman Sachs say?
Goldman is pleased with its plans and believes the company's shares are undervalued at the current level.
It said: "We remain positive on TLS, as this update outlines the next steps of the corporate restructure and potential asset monetization, and gives us confidence that its infrastructure value will ultimately be realized by shareholders. Based on our updated transaction multiples/illustrative SOTP valuations, TLS shares currently trade on just 4.1-4.7x ServeCo FY23E EBITDA or 5.7-6.3X at our unchanged A$4.00 12m TP, vs. SPK.NZ at 8.3x. We reiterate our Buy on TLS, our preferred ANZ Telco, ahead of its FY21 results and Nov-21 ID, both of which we view as positive catalysts."
What are the downside risks for the Telstra share price?
While Goldman is positive on the company, it has named a few risks for the Telstra share price that investors ought to consider before investing.
It explained: "Downside risks for TLS include: 1) Increased competition, particularly in the mobile market, 2) disappointing cost out relative to its $2.7bn productivity program, 3) unfavourable regulation across its businesses; 4) asset monetisation is ultimately unsuccessful."
Though, based on its rating and price target, the risks appear skewed to the upside at present.
