Why J.P. Morgan sees more upside for the Telstra share price

Telstra continues to be liked by investment banks – with many seeing more upside on the horizon.

Telstra share price: the thesis & situation

Telstra’s dominance in the Australian telecommunications market, its network advantage and strong brand presence all stand as key positives for the blue-chip telco.

That’s not to say analysts are oblivious to the headwinds facing the sector at large: the NBN in particular has put pressure on Telstra’s margins and the potential for disruption in Australia’s mobile market remains.

Indeed, the NBN’s rollout of Australia’s national broadband network has proven controversial among some in corporate Australia. It was likely the margin pressure noted above that contributed to recent comments from Telstra’s chairman – John Mullen – that:

‘It seems inequitable that the NBN can now move outside its mandate and sell directly to our customers, but RSPs have to stay within their mandate and cannot sell to the NBN’s own protected market in return, due to regulations which prevent retail providers investing in fixed line infrastructure to provide consumer services.’

Broad risks aside – given Australia’s currently tepid economic growth, Telstra’s continued dominance as a telecommunications power-house and without another significant player in the mobile market – the US$432bn investment bank, J.P. Morgan, remains bullish on Telstra’s prospects.

The telco’s market leadership in the 5G space as well as an attractive valuation is also appealing to the investment bank.

This rollout of 5G is anticipated to be the next driver of growth for the company – says Telstra’s CEO.

In line with this and as part of a recent research report, J.P. Morgan’s has remained overweight the blue-chip telco – continuing to see upside potential – with a June CY20 share price target of $4.25.

At Telstra’s (ASX: TLS) last traded share price on Thursday of $3.69, this price target would imply potential upside of around 15% – not including dividends.

Telstra share price: the risks

J.P. Morgan’s risk assessment for Telstra is an intriguing one. Taking a slight broker detour, it is Morgan Stanley for example, that believes the near-term worst case for the Telstra share price would be for the TPG-Vodafone merger – currently being decided over by Justice John Middleton – to be approved.

J.P. Morgan sees it the other way around: in fact, J.P. analysts believe that the TPG-Vodafone merger being approved actually ranks as a positive for Telstra. According to the investment bank this is because it means there would no longer be the potential for another aggressive player in Australia's mobile market.

Interestingly and on the other hand, the investment bank does note that the approval of the TPG-Vodafone merger would create a more fierce combined-competitor, with a stronger balance sheet.

Practise trading Australian telecommunications stocks with an IG demo account now


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.