This broker thinks you should buy the TPG (ASX:TPG) share price dip

The TPG (ASX: TPG) share price is down 40% since its merger with Vodaphone. Could this weakness be a buying opportunity?

| More on:
A compass with the word opportunities is shown in black and blue representing a broker upgrade on the EML share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Things have gone from bad to worse for the TPG Telecom Ltd (ASX: TPG) share price. Its shares have slumped almost 40% since its merger between TPG Telecom Ltd and Hutchinson Telecommunications Ltd on 30 June 2020.

However, broker Morgans thinks the stock could be a 'buy the dip' opportunity. 

Why has the TPG share price underperformed? 

The TPG share price performance has been keeping pace with its competitor, Telstra Corporation Ltd (ASX: TLS). It wasn't until Telstra announced its plans in March to restructure its business that a divergence in performance began to emerge. 

Despite TPG's solid financial performance, the company's management has undergone a series of significant changes. 

The TPG share price took a 7% dive to $6.40 on 26 March after the announcement of its 2020 annual report and the resignation of founder David Teoh. 

Brokers were quick to critique the founder's resignation.

Credit Suisse said at the time that the resignation created a potential "share overhang". This is because David Teoh, his family and associates hold a 17.1% interest in TPG Telecom, with 80% of the holding subject to an escrow until the end of June 2022. The broker notes that his exit could see other shareholders exit their holdings as well. 

To add further insult to injury, the TPG share price took another 5.50% fall to $5.25 on Thursday after the resignation of CFO Stephen Banfield

Why the TPG share price could be a buy

Morgans has retained an add rating for TPG shares on Friday. The broker views the short-term share price weakness as a buying opportunity but reduced its target price from $8.11 to $7.17 to adjust to capex forecasts. 

TPG has not provided any concrete figures regarding year to date performance. However, in its chairman's address to shareholders presentation on 6 May, management said that "we are tracking well against our forecast for the year". Morgans assumes that the company is broadly comfortable with FY21 earnings.  

The TPG share price is fetching $5.45 at the time of writing, up 4%. 

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A diverse group of people form a circle at a park and raise their arms together.
Share Market News

Here are the top 10 ASX 200 shares today

ASX investors ended the trading week on a high note this Friday...

Read more »

Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Catapult, De Grey Mining, Domino's, and Nufarm shares are charging higher

These shares are ending the week strongly. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Healthcare Shares

This ASX All Ords share is diving 18% as inflation pain draws blood

This healthcare company delivered a trading update at its annual general meeting today.

Read more »

Three analysts look at tech options on a wall screen
Technology Shares

Up 70%, is it too late to invest in Xero shares?

This ASX tech darling hit a new all-time share price record yesterday.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Healius, Opthea, Peninsula Energy, and Wildcat shares are falling today

These shares are having a tough finish to the week. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Market News

Why this ASX uranium share is plunging 25% on Friday

Let's see why investors are smashing the sell button today.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Share Gainers

How these 3 ASX 200 stocks smashed the benchmark this week

Investors sent these ASX 200 stocks flying higher over the week. But why?

Read more »