Is the Telstra share price in the buy zone after the telco giant's mobile plan increases?

What's going on with Telstra's shares this week?

| More on:
A man wearing a colourful shirt holds an old fashioned phone to his ear with a look of curiosity on his face as though he is pondering the answer to a question.

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

The Telstra Corporation Ltd (ASX: TLS) share price has edged higher this week despite the market weakness.

This appears to have been driven by the telco giant announcing price increases to its mobile plans.

What are the changes?

Telstra has announced the introduction of inflation linked pricing. This will see the company index its mobile plans by CPI on an annual basis.

According to a note out of Goldman Sachs, its analysts see this "as a positive development" and "could be meaningful for supporting industry rationality." This is based on what the broker has seen globally in the industry.

Its analysts highlight that that in July Telstra's advertised postpaid plans will increase by $3 to $4. This will see its Basic/Essential/Premium plans now at $58/$68/$89 per month.

And while no changes were made to its Belong or MVNO pricing, the broker suspects that the introduction of 5G to these brands will be a "potential catalyst for updated pricing."

Overall, the broker appeared pleased with the changes, though they may have fallen a touch short of its expectations. Goldman commented:

While the Jul-22 pricing increase was within our range of expectations for Telstra (headline +$3-6 increases), it appears the impact from these plans will be lower than our +$2.50 prior growth expectations for FY23 (adjusting for GST, share of in-market plans, and impacts from spin downs / Belong dilution). Looking forward, we believe Optus' pricing strategy will now be in focus following recent comments at its FY22 result, and noting TPG is awaiting the outcome of its Mobile Network sharing proposal with Telstra.

Is the Telstra share price good value?

Goldman Sachs currently has a neutral rating on the company's shares.

However, with its price target of $4.30, based on the current Telstra share price of $3.98, this still implies potential upside of 8% for investors over the next 12 months.

Goldman is also forecasting 16 cents per share dividends in FY 2022 and FY 2023. This equates to a 4% annual yield, which stretches its total potential 12-month return to 12%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Communication Shares

a woman in business wear looks at her phone against the window of a high rise space with a city landscape view of tall buildings outside.
Communication Shares

Still under $4 despite strong recent results, is Telstra stock too big a bargain to pass up?

Is it time for this telco giant to break free? Let's see what analysts are tipping for the telco giant.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Dividend Investing

Invested $5,000 in Telstra shares in 2021? Here's how much passive income you've already earned

Atop the share price gains, how much passive income have investors earned from their Telstra stock?

Read more »

4 teenagers playing mobile game
Communication Shares

Are brokers bullish or bearish on Telstra shares in November?

Are analysts feeling bullish or bearish about the telco giant's shares?

Read more »

A happy man and woman sit having a coffee in a cafe while she holds up her phone to show him the ASX shares that did best today.
Communication Shares

Where will Telstra stock be in 5 years?

Profit forecasts show a change is coming for the big telco.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Dividend Investing

Passive-income champion: One ASX stock yielding more than 4%

Brokers like the dividend potential from this stock.

Read more »

Ordinary Australians waiting at the bus stop using their phones to trade ASX 200 shares today
Communication Shares

Telstra stock: Buy, hold, or sell?

What are analysts recommending investors do with this telco giant?

Read more »

A woman is excited as she reads the latest rumour on her phone.
Earnings Results

Guess which ASX 300 stock just reported a 21% jump in a critical measure

Growth is the word for this telco, and investors like what they see in the company's Q1 numbers.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Communication Shares

Under $4, do Telstra shares look an irresistible bargain?

Is this an opportunity calling too good to ignore?

Read more »