The TPG Telecom Ltd (ASX: TPG) share price is out of form on Monday.
In afternoon trade, the telco giant's shares are down 6.5% to $6.15.
This means the TPG share price is now down 25% over the last 12 months.
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Why is the TPG share price under pressure today?
The weakness in the TPG share price may have been driven by a lukewarm response to its half year results from a leading broker.
According to a note out of Goldman Sachs, its analysts have retained their neutral rating but cut their price target on the company's shares to $6.10.
This price target represented potential downside of ~7.5% for the TPG share price prior to today's decline.
What did the broker say?
Goldman Sachs was disappointed with TPG's half year results, noting that it fell short of its expectations for sales and net profit by 2% and 37%, respectively.
It commented: "The key weakness was i) continued postpaid mobile headwinds (subs -65k, ARPU -5%); and ii) a -7% decline in the corporate segment revenues; offset by iii) greater cost reductions, with SG&A -15% yoy."
Goldman doesn't appear to be expecting much better in the second half and was concerned by management's decision not to provide guidance for the full year.
Its analysts explained: "Looking forward, although TPG is benefiting from its recent mobile price rises ($3-4 ARPU tailwind) and sub trends should improve as its 5G network reaches scale, we are concerned that earnings are yet to stabilize, forecasting 2H21 EBITDA -$35mn sequentially. This uncertainty is exacerbated by the lack of FY21 guidance, which we thought should have been provided (with covid uncertainty captured within the 1H21 earnings base)."
One positive, though, is that the broker believes TPG will benefit from the reopening of international borders, when that finally happens.
But for now, the broker sees more value in the Telstra Corporation Ltd (ASX: TLS) share price than the TPG share price. It currently has a buy rating and $4.30 price target on Telstra's shares.
It concluded: "We revise TPG FY21-23 EBITDA -1% to on lower revenue, while EPS is -14% to -45% on higher D&A/Tax. We prefer TLS over TPG, given superior infrastructure, earnings recovery is underway, and multiples that are in-line."
