Investors looking for buying opportunities within the S&P/ASX 200 Index (ASX: XJO) may want to consider Telstra Group Ltd (ASX: TLS) shares.
The ASX telco share price hasn't moved much in 2024 to date – it's close to the valuation at which it started the year. This means it has significantly underperformed the ASX 200, which is up almost 11% in 2024 to date.
However, the company's underlying financials have been improving, and it is projected to continue making progress over the next year.
Let's look at some of the views and forecasts for Telstra shares from one of Australia's leading brokers.
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FY25 forecasts
UBS is positive about the company's "solid outlook" for the 2025 financial year. This is primarily supported by upcoming mobile price rises, which occurred in late August for postpaid customers and late October for prepaid customers. Telstra expects average revenue per user (ARPU) to grow by 2.1% in FY25 because of the flow-through of enterprise headwinds into the first half of FY25.
The broker also highlighted in its note to clients that Telstra was continuing to focus on the $350 million net fixed cost-out reduction target by FY25.
However, there are headwinds for its enterprise business and mobile subscriber growth is forecast to slow because of falling international migration. Even so, it still expects postpaid subscribers to grow at a compound annual growth rate (CAGR) of 0.9%.
Pleasingly, UBS expects an operating profit (EBITDA) CAGR of 5% between FY24 to FY27 and the dividend is forecast to grow at a CAGR of 8% over the next three years.
The broker is forecasting Telstra could make $23.86 billion of revenue in the 2025 financial year, $3.84 billion of earnings before interest and tax (EBIT), $2.15 billion of net profit and 19 cents of earnings per share (EPS). Each of those figures would represent a pleasing increase compared to FY24.
UBS is also projecting that the Telstra dividend per share could be hiked by 5.5% to 19 cents in FY25. At the current valuation, that translates into a grossed-up dividend yield of 6.8%, including franking credits.
Telstra share price target
A price target tells investors where the broker thinks the share price will be in 12 months from the time of the rating.
UBS currently has a buy rating on Telstra shares, with a price target of $4.40. Therefore, the broker implies that Telstra shares could deliver 10% capital growth as well as 6.8% grossed-up passive income for a potential total return of approximately 17%. If that happens, I'd guess that would be a market-beating return from the ASX telco share.
