Telstra Group Ltd (ASX: TLS) shares are a popular option for Aussie investors.
The telco giant's shares feature in countless investment portfolios and superannuation funds across the country.
But while the telco giant is a popular option, is it a good option? Let's see what a $5,000 investment in the company's shares could turn into in 12 months.
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$5,000 invested into Telstra shares
On Monday, the Telstra share price closed the session at $3.88. This means that with $5,000 (and an extra $1.32 for good measure) to invest, you could pick up a total of 1,289 units.
What could they be worth by this time next year?
Well, the good news is that the majority of analysts out there believe that Telstra's shares are undervalued at current levels.
For example, the teams at Morgan Stanley, UBS, Ord Minnett, Goldman Sachs, and Bell Potter all have the equivalent of buy ratings on the company's shares with price targets offering 10%+ upside.
Goldman Sachs is among the most bullish out there with its buy rating and $4.50 price target. This suggests that upside of 16% is possible for investors that are buying at current levels.
If this prediction were to prove accurate, it would mean that those 1,289 Telstra shares have a market value of $5,800.50.
Commenting on its buy recommendation, the broker said:
Our positive view on Telstra reflects its ability to grow Mobile/InfraCo earnings and support sustained DPS growth. However, we do believe TLS is well placed to deliver another year of strong NBN earnings growth, given recent consecutive price rises are more than offsetting subscriber losses and access price rises (C&SB EBITDA +37% in FY25). This contrasts to TPG, which we expect to deliver flat NBN margins in FY25 while ceding customers, contributing to our forecast -1% earnings decline in FY25. Ultimately we expect both TLS and TPG to respond to market conditions and look to stabilize their customer bases, impacting earnings growth in FY26.
In addition, the broker sees opportunities for Telstra to unlock value through asset divestments. It adds:
We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn. Although there is some debate around the strategic benefits, we see a strong rationale for monetizing the recurring NBN payment stream, given its inflation-linked, long duration cash flows could be worth A$14.5bn to A$17.9bn, with no loss of strategic benefit.
Don't forget the dividends
Telstra shares are also a firm favourite with income investors due to their attractive dividend yield.
Goldman expects this trend to continue in FY 2025 and is forecasting a fully franked 19 cents per share dividend (rising to 20 cents per share in FY 2026).
This represents a 4.9% dividend yield and would mean income of $244.91 from those 1,289 shares.
This brings the total return from an approximate $5,000 investment into ~$1,050. Not bad for 12 months!
