Telstra Corporation Ltd (ASX: TLS) shares could be great value at current levels.
That's the view of analysts at Morgans, which have named the telco giant on the broker's best ideas list for November.
Morgans' best ideas are those that the broker believes offer the highest risk-adjusted returns over a 12-month period. They are also supported by a higher-than-average level of confidence and are its most preferred sector exposures.
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What is the broker saying about Telstra shares?
According to the note, the broker is feeling positive on Telstra for a number of reasons. This includes Optus' recent cybersecurity incident, strong earnings momentum following its turnaround, and the recent company restructure.
In respect to the latter, the broker feels that this restructure could unlock significant value for shareholders from assets sales etc. It explained:
After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote[d] on Telstra's legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA. However some of TLS's high quality long life assets like InfraCo are worth substantially more, in our view. We don't think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.
Morgans has an add rating and $4.60 price target on Telstra's shares.
Based on the current Telstra share price of $3.95, this implies potential upside of 16.5% for investors over the next 12 months.
Morgans also expects a 16.5 cents per share fully franked dividend in FY 2023. This represents a dividend yield of 4.1%, stretching the total potential return to almost 21%.
