Telstra Group Ltd Share Price Hits Multi-Year Low After Earnings Guidance Update

The Telstra Group Ltd (TLS) share price took a hit on Tuesday, closing at a multi-year low of $3.57 after the company issued an update on its earnings guidance. Goldman Sachs, a prominent financial institution, analyzed the update and provided insights into the telco giant’s future prospects.

As per the earnings guidance, Telstra reaffirmed its forecast for FY 2024, expecting underlying EBITDA in the range of $8.2 billion to $8.3 billion. Looking ahead to FY 2025, the company anticipates a growth in underlying EBITDA to $8.4 billion to $8.7 billion, driven by a $350 million cost reduction plan.

Goldman Sachs highlighted both positives and negatives from the update. A key negative was Telstra’s decision to remove the CPI linked-pricing mechanism, influencing industry dynamics in mobile services. The absence of this mechanism could impact future mobile pricing decisions and customer expectations.

On the positive side, Telstra’s cost reduction initiatives, including significant reductions in NAS products and headcount, exceeded expectations. This bodes well for the company’s earnings outlook for FY 2025 and beyond, offsetting the impact of deferred price rises.

Despite the adjustments in valuation and dividend forecasts, Goldman Sachs maintained a buy recommendation for Telstra shares, setting a target price of $4.25, indicating a potential upside of 19% over the next 12 months.