Telstra: 6 insights ahead of today's result

The market’s 7th biggest company, Telstra, reports this morning to much anticipation. One key line of questioning will be around capital management and dividend strategy post-NBN, and what any guidance of a dividend cut would do to the price? We bring you 6 insights from the Livewire community ahead of the result. Opinions vary greatly, but include two notably contrarian bull calls for the stock from the buyside, and a technical view on the stock arguing for the next target being $5. Read on for the lowdown ahead of this morning's key announcement. 

MICHAEL GABLE, Fairmont: Telstra: Next target $5

The Telstra chart has been an easy one to read in the last couple of years. Telstra still looks bullish, despite falling back from that $4.50 peak in May. The last few weeks have seen Telstra hold above $4. A result on Thursday that is absent of any nasty surprises could see Telstra rally towards our next target of $5. (VIEW LINK)

NICK HARRIS, Morgans: Caution with Telstra this reporting season

Over the next five years, TLS's earnings are propped up by one-off gains (disconnection payments) from the NBN, which more than offset the short term NBN margin pressure. Post these one-off gains (and assuming the NBN remains in its current form, which we view as unlikely) then earnings for TLS drop off.

In our view, the million-dollar question is 'Does this capital management framework provide the catalyst to rebase dividends?' We acknowledge that a lot will change in the coming years but think this is business as usual for Telstra.

In the short term we think the share price risk for Telstra (TLS) lies to the downside. Our FY18 EPS forecasts sit 7% below consensus and we are relatively cautious of expectations heading into the August result and capital management. In the long term, we see upside risk (assuming our views about the NBN are correct). We do not expect a dividend cut but highlight this is a risk heading into the result. We maintain our Hold recommendation: (VIEW LINK)

LIVEWIRE SURVEY: TLS dividend cut could send stock up

We surveyed Livewire readers recently to ask what would happen to the Telstra share price in response to the dividend cut tipped by some analysts. The consensus across more than 600 votes is - rather than sending the share price south, a cut would send it higher. Today could be the day we find out... 

SEAN FENTON, Tribeca: Time for a contrarian call

Challenges for Telstra are well flagged and include margin pressure from the NBN, growing mobile competition, with the added possibility of a dividend cut. This is all well known and largely in the price. Less discussed is the upside from these four points: 1) Even after reduced dividends, this will provide support in a market downturn; 2) Cost out opportunities; 3) NBN payments could be ploughed into buybacks; 4) Mobile network investments should aid margins: (VIEW LINK)

CHARLIE AITKEN, AIM: A contrarian idea is brewing

Telstra is starting to really interest me so we're doing a bit more work on that one. In a market that's not easy to find value that could be very interesting. [Good value] is pretty close to here, I'd actually say $4. I think on forward earnings of 11 times and a cut dividend yield of 6% fully franked - I think there is a line in the sand there:  (VIEW LINK)

ROGER MONTGOMERY: Montgomery: Telstra is a Sell / Hold

Despite accusations of monopolistic behaviour, investors have not seen rising profits from Telstra for many years and a large revenue hole will emerge after consumers exit the company’s copper network and are invited by all providers to join the NBN with them. Indeed, the company’s forecast 2017 profit will be no bigger than 2008. This is partly because a very high proportion of the company’s earnings are paid out as dividends, meaning relatively little profit is retained and reinvested for growth. Investors should probably think of Telstra shares as they might a bond. Steady dividend income can be attractive but growth is required to fend off the ravages of inflation and maintain purchasing power:  (VIEW LINK)