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

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

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


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.