Can the Telstra share price hit $4 in the next 12-months?

Telstra share price: playing the long-game

Virtually no stock was spared from today’s sell-off.

The ASX 200 declined a significant 1.83% – or 125 points just before noon. The Telstra (ASX: TLS) share price followed in-step, dropping 2.34% in the same period and currently trades at the $3.74 mark.

Such is the inevitable volatility of equity markets. Indeed, it was Warren Buffet who once said that:

‘In terms of what’s going to happen in a day or a week or a month or a year even, I’ve never felt that I knew it and I’ve never felt that was important.’

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Yet in spite off this brutal sell off today, analysts remain bullish on Telstra’s prospects.

The 12-month average analyst share price target illustrates this well: standing at a modestly higher $3.93 per share, according to Bloomberg Data.

A more granular look at the 15 analysts covering the blue-chip stock highlights this optimistic disposition even further. Renowned firms like Goldman Sachs have a buy rating on Telstra, J.P. Morgan is overweight the telco, and Macquarie Wealth Management says the stock will ‘outperform.’

Overall, 60% of the analysts covering Telstra (ASX: TLS) have a buy rating on the telco, according to Bloomberg Data.

The next steps

As we recently covered, the fact that Telstra is gearing up for the next phase of ‘G-growth’ may potentially go a ways to explain this bullishness.

'We are about to move into the first part of that cycle again with the roll out of 5G,’ said Telstra’s esteemed CEO Andy Penn.

With the CEO adding that, 'while we will continue to see industry ARPUs decline for the next 12 months or so, transacting MMC is increasing for Telstra indicating a return to ARPU growth ahead.'

Macquarie Wealth Management agrees, though the investment bank thinks this growth won’t come all at once.

Here, the investment bank stressed that competition is currently putting pressure on Telstra's mobile average revenue per user (ARPU) growth; though Macquarie posits that key indicators suggest that an ‘inflection point’ is set to be reached in the next 12-months.

Quantifying the impact of this view, the investment bank sees around $250m in mobile earnings (EBITDA) growth in the 2021 fiscal year.

Taking a broader view, a more favourable earnings outlook and longer term reductions in Telstra's capital expenditure were the key reasons that Macquarie recently upgraded their price target upward on the telco. Here Telstra’s stock was upgraded from neutral to outperform; and the 12-month share price target was lifted to $4.00 from $3.75.

Ultimately, Macquarie believes that the next price catalyst for the Telstra share price will come when the company releases its H1 FY20 results, expected to occur on February 14.

To read our previous coverage on Telstra's growth plans, click here now