Can 2022 be the year of the market comeback for Telstra?


This week Telstra completed its corporate restructure, which begs the question as to whether this is the start of a strong growth period for the big telco or will it disappoint once again.

Telstra listed on the stock exchange in 1997 and for the vast majority of time it disappointed investors, as it spent more time falling than rising. After a brief period trading under the stock ticker code TLSDA, this week Telstra started trading back under its original ticker TLS.

For those who may not know, Telstra restructured itself so that Telstra is now a holding company of its three business subsidiaries, which include InfraCo Fixed, InfraCo Towers and ServeCo. The restructure will allow Telstra to get more value out of its assets, which will lead to more profit. It also allows Telstra to grow as we move into an ever-increasing age that is reliant on communications services.

telstra shares investing aim for the return not the income

Investors would be disappointed this year, as Telstra has fallen just under 6% since 1 January, although it has fared better than the All Ordinaries Index which is down more than 9%. This restructure has been a long time coming and I strongly believe Telstra will now break out of its lackluster performance over the past few years that has seen it grow by 11% since 1 November 2017

The good news for long-suffering shareholders is that I believe Telstra will be bullish over the long term and now that the restructure has occurred, this should take the handbrake off and allow it to take off down the superhighway. The expected price target is at least $4.60 in the not-too-distant future and between $5 and $6 over the medium term.

The best and worst performing sectors this week

The best-performing sectors include Utilities and Communication Services, which are both up more than 2% followed by Consumer Discretionary up more than 1%. The worst-performing sectors include Consumer Staples down under 1% followed by Materials up just under 1% and Financials up slightly more than 1%.

The best performers in the S&P/ASX top 100 stocks include Downer EDI up more than 9% followed by Alumina up more than 7% and Computershare up more than 5%. The worst-performing stocks include Domino's Pizza down more than 14% followed by Lend Lease Group down more than 10% and IGO down more than 5%.

What's next for the Australian stock market

This first week of November has certainly been a good example of why I keep recommending investors be cautious. While the All Ordinaries Index had risen more than 3% by Wednesday, it wiped out more than 2% of that rise on Thursday.

Given this, it will be interesting to see where the market finishes on Friday, as I don't believe we have seen the end of the large swings in price, as the market continues to be indecisive.

The good news is that the All Ordinaries Index moved up to its highest level in five weeks and is above the important 7000 point level. Until it breaks through this level strongly, I expect we will continue to experience volatility in the market.

While the bulls are marginally more dominant and edging the market higher, if it is to continue to rise they do need to come out in force. While it is possible this slow upward trend may last for a few more weeks, given the lack of strength from the bulls we could expect at least one week down in the next couple of weeks.

Until the trend is properly underway, I will continue to reiterate that investors need to exercise caution because as we have seen this week the market is prone to do the unexpected.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.