Telstra share price to hit $4.10, says Credit Suisse analysts

As the Telstra's earnings approach, we look at some of Credit Suisse’s thoughts on the stock as well as the company’s recent Board update.

Telstra share price down, outlook remains optimistic

While the Telstra Corporation (TLS) share price has traded modestly lower over the last month, analysts remain bullish on the large-cap telco heading into its full-year (FY20) results, set to be released this Thursday.

The stock’s longer-term performance is just as problematic, with Telstra seeing its share price decline some 12% over the last year. Telstra closed out Monday's session at $3.390 per share.

Board update in focus

On Tuesday the company announced the introduction of a new director to the Telstra board, Bridget Loudon. Described as an entrepreneur, Bridget Loudon founded Expert360 – described as 'Australia's number one skilled talent platform’ – and has prior experience at Bain & Company.

Speaking of this new appointment, Telstra Board Chairman, John Mullen said 'I am delighted to have Bridget join the Board – her youth and entrepreneurial start-up experience in particular will provide a fresh and unique perspective to ensure we are considering a range of views as we navigate Telstra through the next period.’

Her official appointment to the Telstra Board will occur on 14 August.

Credit Suisse reiterates bullish stance heading into FY20 results

Despite recent share price weakness, Credit Suisse analysts have remained bullish on the blue-chip telco heading into its full-year report, this week reiterating their Outperform rating and $4.10 price target.

While Credit Suisse analysts have made no changes to their earnings estimates, expecting Telstra to report FY20 EBITDA of $8,490 million, EBIT of $3,644 million and adjusted net income of $2,041 million – the investment bank noted that they have changed the:

‘Presentation of our earnings estimates to exclude A$600m of Mobile handset lease adjustments from our reported estimates for each of FY20 & FY21 – this previously had the impact of increasing each of EBITDA and D&A.’

As with our previous coverage of Telstra’s FY20 results, the investment bank’s analysts noted that investors will likely be keen to see the expected future impact of covid-19 quantified through FY21 earnings guidance, if provided. For reference, in March, Telstra reaffirmed its FY20 guidance as many companies withdrew or aggressively reduced theirs.

Click here to read out prior earnings coverage of Telstra.

Finally, it should be noted that while the investment bank’s analysts expect broad-based declines in Telstra's fundamentals during fiscal 2021 – placing FY21 revenue estimates at $23,893 million, EBITDA estimates at $8,332 million and net income estimates at $2,178 million – Credit Suisse analysts nonetheless note that ‘we don’t think the market is pricing in a potential recovery from the cyclical weakness.’

Indeed, by 2022, Credit Suisse expects Telstra to trade on an earnings multiple of 21.6x, up from its current forward multiple of 19.8x.

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